Sensata Technologies surges as Elliott gains board seat, CEO steps down

Shares of Sensata Technologies (ST) surged 12% higher in early trading Tuesday after the company reported solid first-quarter results and announced a surprise deal with activist hedge fund Elliott Investment. The company also announced that CEO Jeff Cote is stepping down, and Elliott is now the company’s largest shareholder and has a new board seat.

In the first quarter, Sensata reported Q1 EPS of $0.89, beating the analyst estimate of $0.85. Revenue for the quarter was $1.01 billion versus the consensus of $986.51 million. Looking ahead, the company sees second-quarter EPS of 0.89-$0.95, versus the consensus of $0.92, and revenue of $1.025-1.055 billion, versus the consensus of $1.037 billion.

Cote has informed the board that he will retire as CEO, President, and a member of the board effective April 30, 2024. Martha Sullivan has been named Interim President and CEO, and a CEO search committee has been established to find a new permanent CEO.

Meanwhile, following talks with Elliott, Sensata has appointed Phillip Eyler to the board. Eyler will serve on the CEO Search Committee and the Nominating and Governance Committee when he joins the Board on July 1, 2024.

Wall Street analysts were bullish on the news, with several raising price targets on Sensata’s stock.

“Given the choppy sales and earnings performance at the company in the last two years, as well as underperformance of the stock, we are not surprised by changes, and will be interesting to see what changes may be in store under a new CEO,” analysts at Stifel said while raising the price target to $43 but maintaining a Hold rating.

Analysts at BofA Securities maintained a Neutral rating on the stock and raised the price target to $44. They were positive on the Elliott news. “We view the transition as an attempt to improve execution, capitalize on the hybrid/EV portfolio, drive margins higher, drive improved capital allocation and ultimately improve total shareholder return,” they said. “Given the strong sensor portfolio at Sensata, we view this as achievable but also see the long cycle products to constrain a very quick path to materially higher growth/margins.”

Meanwhile, analysts at Baird named Sensata a ‘Bullish Fresh Pick’ amid the Elliott news. “We are placing a Bullish Fresh Pick on ST (new $47 price target), as we expect the newly announced cooperation agreement with Elliott Investment Management to drive sustained near-term trading momentum (Bullish Fresh Pick expires July 31),” they said.