Gentex's Fourth Quarter Sees Continued Gross Margin Pressure but Improvement Likely in 2023

Gentex’s fourth-quarter 2022 saw the auto-dimming mirror maker continue to fight rising material, labor, and freight costs, plus last minute customer production changes due to the chip shortage. Fourth-quarter EPS of $0.37 increased by 5.7% year over year but still missed the Refinitiv consensus of $0.38. Revenue rose nearly 18% on a soft comparable due to the chip shortage’s impact in 2021 but still missed consensus, sending the stock down over 2% during Jan. 27 trading. Management gave detailed 2023 guidance, and capital expenditures for 2023 and 2024 will be higher than we were modeling due to some delayed 2021 and 2022 spending, but we see no reason to change our thesis or fair value estimate. We will revisit all modeling assumptions after the 10-K is filed.