Morningstar | Long-Term Trend Drives Sensor Specialist Sensata
As secular and technological trends drive increased safety, emissions, and efficiency standards, we think Sensata Technologies is poised for solid growth and profitability. The company is a leading supplier of sensors and controls in difficult applications across the industrial sector with significant market share in key components for automotive, aerospace, and heavy-vehicle markets. We believe Sensata’s competitive position is stable, as customers continue to face switching costs, enabling the firm to retain its significant market share in several applications in major end markets.We believe Sensata's near-term growth will be a function of increased content in the global automotive market. While we anticipate Sensata’s organic sales will keep up with their respective geographic markets, content gains should allow the firm to outpace global automotive production growth, while also broadening potential switching costs and potentially insulating revenue and profits from the worst of the auto industry’s cyclical downturns. Safety and emissions regulations have already helped drive growth, and we expect China’s tire pressure monitoring standards to be a significant opportunity for Sensata. In the longer term, the trend toward electrification and autonomous vehicles should open up new opportunities for Sensata to produce highly differentiated smart content for a variety of applications. Sensata has indicated its awareness of these opportunities by investing in lidar company Quanergy. Similar trends are also developing within industrial, HVAC, and heavy-vehicle and off-road markets. We see HVOR as a particularly fertile area for Sensata, as electrification of hydraulic systems and increasing efficiency and safety demands will drive significant content increases. Despite Sensata’s presence in a very competitive space, content growth should result in mid-single-digit revenue growth for the firm in these markets. We expect the automotive market will continue to dominate Sensata’s revenue, but the firm’s acquisitions of CST and Schrader have also given it an opportunity to drive growth in the higher-margin industrial, aerospace, and defense markets.Sensata Technologies Holding is a holding company. Co. conducts its business through subsidiary companies, which operate business and product development centers in the U.S., the Netherlands, Belgium, China, Germany, Japan, South Korea, and the U. K.; and manufacturing operations in China, Malaysia, Mexico, Bulgaria, Poland, France, Germany, the U.K., and the U.S. Co. is engaged in the development, manufacture and sale of sensors and controls. Co. produces a range of sensors and controls for applications such as pressure sensors in automotive systems, and thermal circuit breakers in aircraft, among others. Co.'s operations has two businesses, Performance Sensing and Sensing Solutions.
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