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ST

Sensata Technologies Holding plc (ST)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue $943.4M and adjusted EPS $0.87 both topped Wall Street consensus; revenue beat by ~$9.9M and adjusted EPS beat by ~$0.03. Management highlighted resilient execution and stronger free cash flow conversion at 91%, with adjusted operating margin at 19.0% despite ~20 bps tariff dilution . Values retrieved from S&P Global.*
  • Sequential improvement: revenue +$32M vs Q1, adjusted EPS +$0.09 vs Q1; Sensing Solutions grew ~9% YoY while Performance Sensing fell ~10% YoY due to divestitures and weakness in on-road trucks .
  • Q3 2025 guidance: revenue $900–$930M (includes ~$15M tariff pass-through), adjusted EPS $0.81–$0.87, adjusted margin 19.0%–19.2% (19.3%–19.5% ex-tariff); dividend maintained at $0.12 for Q3 .
  • Capital allocation and deleveraging: net leverage improved to 3.0x LTM adjusted EBITDA; Q2 buybacks $20M and dividends $17.6M; CFO Andrew Lynch appointed July 21, reinforcing operational focus and margin resilience narratives .

What Went Well and What Went Wrong

What Went Well

  • Beat-and-raise cadence with resilient execution: “We exceeded our revenue and earnings commitments and significantly improved our free cash flow” (CEO) .
  • Margin and cash discipline: adjusted operating margin held at 19.0% while free cash flow rose to $115.5M (17% YoY); cash conversion reached 91% on improved working capital and cost productivity (CFO) .
  • Sensing Solutions strength: revenue +~9% YoY and margin +50 bps to 30.2% on industrial leak detection outgrowth and aerospace; HAL gas leak detection on track for ~$70M in 2025 with pathway to >$100M in 2026 (CEO/CFO) .

What Went Wrong

  • Top-line YoY decline: revenue down 8.9% to $943.4M primarily from divestitures and product lifecycle actions .
  • Performance Sensing pressure: segment revenue down ~10% YoY with continued HVOR softness (on-road truck production down >20% in 1H across NA/EU) and off-road slowdown into Q3 (CFO) .
  • GAAP EPS compression: diluted EPS fell to $0.41 from $0.47 YoY; non-GAAP adjustments remain material (amortization, restructuring, tax effects) .

Financial Results

Consolidated quarterly performance (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$907.7 $911.3 $943.4
Diluted EPS (GAAP, $)$0.04 $0.47 $0.41
Adjusted EPS ($)$0.76 $0.78 $0.87
Operating Margin (GAAP, %)8.1% 13.4% 14.6%
Adjusted Operating Margin (%)19.3% 18.3% 19.0%
Free Cash Flow ($USD Millions)$138.9 $86.6 $115.5

Actuals vs Wall Street consensus (S&P Global)

MetricQ1 2025Q2 2025
Revenue Consensus Mean ($USD)$881.3M*$933.5M*
Revenue Actual ($USD)$911.3M $943.4M
Primary EPS Consensus Mean ($)$0.720*$0.837*
Adjusted EPS Actual ($)$0.78 $0.87

Note: Values retrieved from S&P Global.*

Segment breakdown – Q2 2025

SegmentRevenue ($USD Thousands)Operating Income ($USD Thousands)Segment OI Margin (%)
Performance Sensing$652,225 $146,876 22.5%
Sensing Solutions$291,159 $88,036 30.2%
Other$0 $0 0.0%

End-market and geography mix – Q2 2025

CategoryMix (%)
Automotive55.9%
Heavy Vehicle & Off-Road17.3%
Industrial17.2%
HVAC4.6%
Aerospace5.0%
Americas40.3%
Europe28.1%
Asia/Rest of World31.6%

KPIs

KPIQ2 2025
Free Cash Flow ($USD Millions)$115.5
Cash Conversion (%)91%
Net Debt ($USD Millions)$2,560.3
Net Leverage (x LTM Adj. EBITDA)3.0x
Cash & Cash Equivalents ($USD Millions)$661.8
Share Repurchases ($USD Millions)$20.1
Dividend Paid ($USD Millions; $0.12/share)$17.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 2025$910–$940 Actual $943.4 Beat (top end)
Adjusted EPS ($)Q2 2025$0.80–$0.86 Actual $0.87 Beat (top end)
Adjusted Operating Margin (%)Q2 202518.6%–18.8% (incl tariff) / 19.0%–19.2% ex-tariff Actual 19.0% (20 bps tariff dilution) In line (ex-tariff)
Revenue ($USD Millions)Q3 2025—$900–$930 (incl ~$15M tariff) New
Adjusted EPS ($)Q3 2025—$0.81–$0.87 New
Adjusted Operating Margin (%)Q3 2025—19.0%–19.2% (19.3%–19.5% ex-tariff) New
Dividend ($/share)Q3 2025—$0.12; payable Aug 27; record Aug 13 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Current Period (Q2 2025)Trend
Tariffs/Macro~95% mitigation; guided ~$20M pass-through; ~40 bps margin dilution assumption ~100% mitigation in Q2; ~$12M pass-through; ~20 bps dilution; Q3 assumes ~$15M Improving mitigation, lower dilution
Supply Chain & USMCAIncreased USMCA qualification to ~80% of Mexico-sourced revenue Normalized operations; order book “pretty solid” for Q3 Stabilizing
China NEV wins & contentSmall-to-medium wins with local EV OEMs; foundation for 2026 90% YTD wins with top local OEMs; faster design cycles → revenue later 2025; parity content aim Accelerating wins; outgrowth foundation
Industrial leak detection (HAL/A2L/A3)Growth driver; leadership position ~$70M 2025; margins at normalized industrial levels; TAM ~$150M NA + ~$150M EU Scaling revenue/margins
HVOR cycleSofter HVOR; on-road truck declines; watch back half On-road truck down >20% 1H; off-road slowdown into Q3; undergrowth vs market due to Western OEM mix Weakness persists
Cybersecurity incidentTwo-week disruption; immaterial financial impact Fully recovered; no material impact Resolved
Capital allocation & deleveragingRepurchased ~$100M Q1; ROIC +50 bps; net leverage just over 3x Repurchased $20M Q2; ROIC 10.1%; net leverage 3.0x; prioritizing deleveraging Continued execution

Management Commentary

  • CEO: “Our back-to-basics approach continues to deliver… we exceeded our revenue and earnings commitments and significantly improved our free cash flow” .
  • CFO: “Adjusted operating income… included approximately $12M of zero margin pass-through revenues related to tariff recovery, which were 20 bps dilutive… adjusted margins improved 70 bps sequentially” .
  • CEO on China: “We have significantly increased our pace of new business wins in China… more than 90% of these wins are with top local OEMs and leading NEV players” .
  • CFO on cash: “We achieved robust free cash flow of $116M… conversion rate of 91% of adjusted net income… and reduced net leverage to 3.0x” .
  • CEO on strategy: focus on core technologies (pressure, temperature, electrical protection), platform-driven applications, and regulated/mission-critical sockets .

Q&A Highlights

  • Margin expansion drivers: primarily operational productivity; sequential expansion expected; mix impact offset by industrial outgrowth; longer-term margin targets to be clarified with 2026 guide .
  • HVOR and auto outlook: HVOR down >20% 1H for trucks; auto production moderating; Europe regulatory shifts may favor ICE/hybrid content parity; China outgrowth expected to normalize in 2H and accelerate in 2026 .
  • Free cash flow and CapEx: 80%+ conversion is the “floor”; expect CapEx lift in 2H but maintain strong conversion; normalized CapEx ~4% of sales over time .
  • Deleveraging approach: accumulate cash near-term; opportunistic debt actions ahead of 2029 maturities; target <3.0x moving towards ~2.5x .
  • Leak detection TAM/margins: NA ~$150M and EU ~$150M TAM; margins now at normalized industrial levels; outgrowth expected low-to-mid single digits in 2H .

Estimates Context

  • Q2 2025: Revenue $943.4M vs consensus $933.5M; Adjusted EPS $0.87 vs consensus $0.837. Both were beats; margin held at 19.0% despite tariff dilution, implying resilient cost productivity. Values retrieved from S&P Global.*
  • Q1 2025: Revenue $911.3M vs consensus $881.3M; Adjusted EPS $0.78 vs consensus $0.720. Values retrieved from S&P Global.*
  • Q3 2025 outlook vs consensus: Guidance midpoint ($915M, $0.84) broadly in line with revenue consensus $921.1M and EPS consensus $0.851; tariff pass-through expected to be margin dilutive by ~10–20 bps. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Clear beat on revenue and adjusted EPS with sequential margin expansion; operational productivity offsets tariff dilution and cyclic end-market headwinds .
  • Sensing Solutions is the growth/mix tailwind near term (industrial leak detection scaling; aerospace steady growth), helping margin resilience as HVOR remains weak .
  • China NEV wins and content parity strategy set the stage for outgrowth normalization in 2H 2025 and a stronger 2026 trajectory; watch for faster revenue realization given shorter design cycles .
  • Free cash flow conversion at 91% and deleveraging priority reduce balance sheet risk; continued buybacks/dividends support TSR while net leverage trends <3x .
  • Q3 guide is prudent and includes tariff pass-through; pre-tariff margin expansion of ~20 bps QoQ targeted, reinforcing 19%+ adjusted margin floor narrative .
  • Non-GAAP adjustments remain sizable (amortization, restructuring, tax items); monitor sustainability of margin resilience as divestiture impact rolls off and mixed end markets evolve .
  • Near-term trading: upside skew if industrial/aerospace momentum persists and auto/HVOR stabilizes faster than modeled; downside if tariff mix dilutes margins more than expected or HVOR weakness intensifies .

Additional references:

  • Q2 2025 press release and 8-K (full GAAP/Non-GAAP reconciliations, segment tables, leverage) .
  • CFO appointment press release (leadership continuity and focus on transformation) .
  • Q3 2025 dividend declaration (income component maintained) .