What happened
Failing to meet analysts' bottom-line expectations, Gentherm(NASDAQ: THRM) reported fourth-quarter 2022 earnings this week, and the market greeted the results with a chilly reception. The inability to meet analysts' earnings estimate, however, wasn't the only source of investors' dismay for the leader in thermal management. A Baird analyst's reduced price target represented another factor in the stock's decline this week.
As of 1:30 p.m. EST, shares of Gentherm were trading 12.2% lower from where they were at the end of last Friday's trading session, according to data provided by S&P Global Market Intelligence.
So what
Whereas analysts had expected Gentherm to book earnings per share (EPS) of $0.62, Gentherm reported adjusted EPS of $0.47. Disappointing as this may have been for investors, the context of the entire year likely proved to be more disconcerting. Compared to 2021, when it reported diluted EPS of $2.79, Gentherm's bottom line cooled considerably in 2022 and totaled diluted EPS of $0.73.
There are many things that can rattle investors' resolve, but one concern that tops the list is uncertainty. Along with the Q4 2022 financial results, management provided 2023 guidance: revenue of $1.45 billion to $1.55 billion. What was missing, though, was earnings guidance. With no insight into 2023 profitability, investors are likely speculating a decline akin to what happened from 2021 to 2022.
In response to the company's Q4 2022 earnings report and its 2023 guidance, Luke Junk, an analyst at Baird, lowered his price target on Gentherm's stock to $82 from $88.
Now what
Between the year-over-year EPS decline and the absent forecast for 2023 earnings, it's little surprise that investors are turning a cold shoulder to Gentherm's stock this week. Prospective investors might see the decline as a buying opportunity, but with shares valued at 22.1 times forward earnings -- slightly richer than the five-year average forward-earnings ratio of 21.9 -- the better course of action may be to let shares cool off further.
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
