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Introduction & Executive Summary
Sensata Technologies (NYSE:ST) reported its first quarter 2025 results on May 8, exceeding guidance across key metrics despite facing revenue headwinds. The sensor and controls manufacturer generated $911.3 million in revenue, up $4 million sequentially from Q4 2024, while delivering adjusted EPS of $0.78, which exceeded the high end of guidance by 5 cents.
Free cash flow emerged as a particular bright spot, reaching $87 million with a 74% conversion rate - representing a 35% year-over-year increase and a 26 percentage point improvement in conversion. The quarter also marked a turning point for the company’s Sensing Solutions segment, which delivered its first quarter of year-over-year growth since Q2 2023.
"We started the year with a strong first quarter which exceeded the high end of our guidance ranges," said CEO Stephan von Schuckmann in the presentation.
Quarterly Performance Highlights
Sensata’s Q1 2025 performance demonstrated resilience in a challenging environment. The company reported adjusted operating income of $166.5 million, representing an 18.3% margin (18.6% excluding tariff costs). Net leverage stood at 3.1x as of March 31, 2025, while ROIC increased to 10.2%.
The company maintained a robust capital return program, repurchasing approximately 3.5 million shares totaling $101 million and paying a dividend of $0.12 per share, which returned $18 million to shareholders during the quarter.
As shown in the following detailed operating results, Sensata’s performance exceeded expectations despite market challenges:
Tariffs have emerged as a significant factor in Sensata’s operations and financial planning. The company disclosed that it faces approximately $15 million per quarter in tariff costs in the US and about $5 million per quarter in China. However, Sensata expects to mitigate these costs through approximately $20 million of pass-through revenue from customers.
The following slide illustrates Sensata’s global manufacturing footprint and regional revenue distribution, providing context for understanding the tariff implications:
Segment Performance Analysis
A notable divergence emerged between Sensata’s two main business segments in Q1 2025. The Performance Sensing segment, which represents the majority of the company’s revenue at $650.4 million, experienced an 8.8% year-over-year decline. This segment primarily serves automotive and heavy vehicle markets, which have faced production volatility as manufacturers navigate tariff impacts.
In contrast, the Sensing Solutions segment returned to growth for the first time since Q2 2023, posting a 1.2% year-over-year increase with revenue of $260.8 million. This segment, which serves industrial and aerospace markets, benefited from improving conditions in industrial applications and strong order backlogs in aerospace.
The segment performance breakdown is detailed in the following chart:
Capital Allocation & Cash Flow
Sensata’s free cash flow performance was particularly impressive in Q1 2025, with $87 million generated at a 74% conversion rate - representing a 35% year-over-year increase. This improvement demonstrates the company’s focus on operational efficiency and working capital management.
The company continued its commitment to returning capital to shareholders through both share repurchases and dividends. During Q1, Sensata repurchased approximately 3.5 million shares for $101 million and paid dividends of $0.12 per share, totaling $18 million.
The following slide details Sensata’s capital return highlights for the quarter:
Market Outlook & Q2 Guidance
Looking ahead to Q2 2025, Sensata provided guidance that reflects both ongoing challenges and operational improvements. The company expects revenue between $910-940 million and adjusted operating income of $169-177 million, translating to margins of 18.6-18.8%. Adjusted EPS is projected at $0.80-0.86.
Notably, Sensata expects adjusted operating margins to return to 19% or better excluding tariffs in Q2 2025, signaling confidence in its operational efficiency initiatives. The guidance includes approximately $20 million related to expected tariff recovery from customers.
The company’s Q2 2025 financial guidance is detailed in the following slide:
Sensata’s market outlook highlights ongoing volatility in automotive production as OEMs navigate tariff impacts, with a potential drop of 1.1 million units in the second half of 2025. The heavy vehicle on-road truck market remains challenged, with production expected to be approximately flat in Q2 compared to Q1.
On a more positive note, the industrial segment returned to growth in the first quarter with approximately 1% year-over-year revenue growth, while aerospace continues to benefit from strong order backlogs, delivering approximately 2% year-over-year growth.
The following slide provides Sensata’s market outlook by segment:
Conclusion
Sensata Technologies demonstrated resilience in Q1 2025, exceeding guidance across key metrics despite revenue challenges. The divergence between segments - with Sensing Solutions returning to growth while Performance Sensing faces headwinds - illustrates the value of the company’s diversified business model.
The significant improvement in free cash flow generation and continued commitment to capital returns highlight management’s focus on shareholder value. While tariffs and market volatility present ongoing challenges, Sensata appears well-positioned to navigate these headwinds through customer pass-through mechanisms and operational efficiency initiatives.
As the company moves into Q2 2025, investors will be watching closely to see if Sensata can maintain its margin improvement trajectory and successfully manage the impact of potential production cuts in key markets.
Full presentation:
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