BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUY BUY RATING SINCE 03/13/2017 TARGET PRICE $171.47 BUSINESS DESCRIPTION Visteon Corporation designs, engineers, and manufactures electronics products for original equipment vehicle manufacturers worldwide. Sector: Consumer Goods & Svcs Sub-Industry: Auto Parts & Equipment Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years TARGET PRICE $171.47 180 160 STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 14.75 65.28 10.39 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues -0.65 0.34-3.20 Net Income 53.57 62.76-24.54 EPS 121.31 638.02-16.41 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 27.64 26.91 13.41 Q3 2016 2.62 26.91 11.79 Q3 2015 2.60 31.31 12.91 P/E COMPARISON Rating History BUY HOLD BUY Volume in Millions 2015 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 140 120 100 80 60 10 5 0 24.93 16.91 Ind Avg 24.97 S&P 500 RECOMMENDATION We rate () a BUY. This is driven by several positive factors, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value. EPS ALYSIS¹ ($) Q1 0.41 Q2 1.31 Q3 0.38 Q1 0.83 Q3 0.61 Q4 0.81 Q1 1.67 Q2 1.41 Q3 1.35 HIGHLIGHTS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, increased its bottom line by earning $3.27 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($6.26 versus $3.27). Q4-1.75 Q2 1.02 The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Auto Components industry. The net income increased by 53.6% when compared to the same quarter one year prior, rising from $28.00 million to $43.00 million. 2015 2016 = not available NM = not meaningful 2017 1 Compustat fiscal year convention is used for all fundamental data items. The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs. The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Auto Components industry and the overall market, 's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500. Net operating cash flow has significantly increased by 87.50% to $45.00 million when compared to the same quarter last year. In addition, has also vastly surpassed the industry average cash flow growth rate of -12.77%. PAGE 1
PEER GROUP ALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) 0% 100% ADNT UNFAVORABLE TEN 5% LCII DAN CPS ALV EBITDA Margin (TTM) AXL BWA DORM FAVORABLE GNTX 35% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $2 Billion and $11.2 Billion. Companies with or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) 0% 100% UNFAVORABLE DORM TEN BWA CPS ALV GNTX 2.5% LCII Earnings Yield (TTM) ADNT FAVORABLE AXL DAN 17.5% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between 0.3% and 95.6%. Companies with or NM values do not appear. INDUSTRY ALYSIS The automobile components industry includes original equipment manufacturers, after-market parts manufacturers and tire producers. The industry includes more than 5,000 US companies with around 6,000 operational factories, generating annual revenue of about $200 billion. The industry is cyclical and highly concentrated. Key players include Johnson Control (JCI), Visteon (), Magna International (MGA), and Goodyear Tire and Rubber (GT). The various product categories include specialized interchangeable components and systems engineered for specific applications, which are usually sold under long-term contracts since they require significant research and development. Tire producers are considered hybrids because they often cater to original equipment manufacturers (OEMs) and to the after-market. Overall demand for auto parts is driven by new car sales, which in turn is influenced by interest rates and the replacement market. Since most expenditure remains constant, profitability depends on two factors, product specialization and operational capacity utilization. In order to compete with large companies, smaller companies need to focus on a limited number of product lines and cater to niche markets with technically superior products. The industry s structure is complex, with smaller companies (referred to as "tier 2" and "tier 3" suppliers) selling parts to larger suppliers, referred to as "tier 1" suppliers. The tier 1 suppliers in turn sell component assemblies or modules to automobile assemblers such as General Motors (GM) and Ford Motor Company (F). The next few years pose significant challenges to auto suppliers in North America. Demand for automotive components has declined in recent years along with OEM sales. Production volumes for Detroit s big three automakers have dropped by an annual average of 2% over the past decade. Such declines amplify the adverse impact of existing operational shortcomings. Intense competition from suppliers in China, India and other low-cost countries is pressurizing margins at a time when prices for key inputs such as steel and aluminum have reached historical highs. Even large suppliers are strained to pass along these cost increases to automakers. Since 2001, about one-third of the region s 25 largest auto suppliers (by revenues) have filed for bankruptcy protection and many continue to struggle. Suppliers are trying hard to boost operational efficiencies, but are limited by their bargaining power on prices with OEMs. PEER GROUP: Auto Components Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 130.64 4,063 24.93 3,165.00 153.00 ADNT ADIENT PLC 77.65 7,229 8.20 16,246.00 889.00 GNTX GENTEX CORP 19.39 5,505 15.39 1,755.22 365.08 DAN DA INC 31.82 4,610 6.66 6,819.00 700.00 LCII LCI INDUSTRIES 122.90 3,065 21.91 2,003.53 141.72 TEN TENNECO INC 56.91 2,936 17.19 9,038.00 177.00 DORM DORMAN PRODUCTS INC 68.84 2,321 20.80 904.60 113.33 CPS COOPER-STANDARD HOLDINGS I 122.62 2,150 16.77 3,555.65 137.92 AXL AMERICAN AXLE & MFG HOLDING 17.88 1,990 6.12 5,478.60 277.70 BWA BORGWARNER INC 52.89 11,151 38.33 9,471.90 292.80 ALV AUTOLIV INC 123.95 10,778 21.37 10,257.20 512.20 The peer group comparison is based on Major Auto Parts & Equipment companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Visteon Corporation designs, engineers, and manufactures electronics products for original equipment vehicle manufacturers worldwide. The company provides instrument clusters, including standard analog gauge clusters to high-resolution, all-digital, fully reconfigurable, 2-D, and 3-D display-based devices; information displays that integrate a range of user interface technologies and graphics management capabilities; and infotainment systems that allows vehicle occupants to connect their mobile devices to the system and safely access phone functions, listen to music, stream media and enable mobile connectivity applications. It also offers audio systems, including audio head units, amplifiers, and analog and digital radios; telematics control unit to enable secure connected car services, software updates, and data; SmartCore, an automotive-grade, integrated domain controller to enhance efficiency, and reduce power consumption and cost; and head-up displays (HUD), such as combiner HUD and windshield HUD that present critical information to the driver. Visteon Corporation was founded in 2000 and is headquartered in Van Buren Township, Michigan. One Village Center Drive Van Buren Township, MI 48111 USA http://www.visteon.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 2.5 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 40% of the stocks we rate. Total Return 5.0 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 90% of the companies we cover. Efficiency 4.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 80% of the companies we review. Price volatility 3.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor. Solvency 4.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 70% of the companies we analyze. Income 0.5 out of 5 stars Measures dividend yield and payouts to shareholders. This company pays no dividends. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 1.75 Q4 FY17 6.26 E 2017(E) 6.96 E 2018(E) INCOME STATEMENT Net Sales ($mil) 765.00 770.00 EBITDA ($mil) 83.00 73.00 EBIT ($mil) 62.00 52.00 Net Income ($mil) 43.00 28.00 FINCIAL ALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 has increased when compared to the same period a year ago. Even though sales decreased, the net income has increased, representing an increase to the bottom line. has liquidity. Currently, the Quick Ratio is 1.69 which shows the ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year. During the same period, stockholders' equity ("net worth") has decreased by 5.09% from the same quarter last year. The key liquidity measurements indicate that the company is unlikely to face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 735.00 854.00 Total Assets ($mil) 2,279.00 2,373.00 Total Debt ($mil) 391.00 371.00 Equity ($mil) 615.00 648.00 PROFITABILITY Gross Profit Margin 17.91% 16.36% EBITDA Margin 10.84% 9.48% Operating Margin 8.10% 6.75% Sales Turnover 1.39 1.33 Return on Assets 6.71% 3.96% Return on Equity 27.64% 2.62% DEBT Current Ratio 1.97 1.99 Debt/Capital 0.39 0.36 Interest Expense 4.00 6.00 Interest Coverage 15.50 8.67 SHARE DATA Shares outstanding (mil) 31 34 Div / share 0.00 0.00 EPS 1.35 0.61 Book value / share 19.84 19.06 Institutional Own % Avg Daily Volume 229,138 307,769 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 3/13/2017. As of 11/22/2017, the stock was trading at a price of which is 1.5% below its 52-week high of $132.59 and 69.8% above its 52-week low of $76.95. 2 Year Chart BUY: $118.66 HOLD: $69.30 2016 BUY: $98.26 $140 $120 $100 $80 MOST RECENT RATINGS CHANGES Date Price Action From To 3/13/17 $98.26 Upgrade Hold Buy 2/1/16 $69.30 Downgrade Buy Hold 11/20/15 $118.66 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/22/2017) 44.02% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.74% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 25.24% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. The current P/E ratio indicates a premium compared to an average of 16.91 for the Auto Components industry and a value on par with the S&P 500 average of 24.97. For additional comparison, its price-to-book ratio of 6.59 indicates a significant premium versus the S&P 500 average of 3.17 and a significant premium versus the industry average of 3.99. The current price-to-sales ratio is well below the S&P 500 average, but above the industry average. Upon assessment of these and other key valuation criteria, proves to trade at a premium to investment alternatives within the industry. Price/Earnings 24.93 Peers 16.91 Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. Price/Projected Earnings 18.77 Peers 13.40 Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. Price/Book 6.59 Peers 3.99 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. Price/Sales 1.28 Peers 1.09 Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a premium to its industry on this measurement. DISCLAIMER: Price/CashFlow 19.30 Peers 11.78 Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. Price to Earnings/Growth 0.27 Peers 0.68 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 638.02 Peers 76.82 Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher 0.34 Peers 12.06 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5