Gentex beats on EPS as margins surge to highest level since 2021
Auto supplier returns $426M to shareholders while operating income climbs 25%
Gentex Corporation reported mixed fourth-quarter earnings results on Friday, matching earnings expectations while falling short on revenue, though the automotive technology supplier delivered its strongest profit margins in nearly five years.
The Michigan-based company posted diluted earnings per share of $0.43, meeting analyst estimates and improving from $0.39 in the year-earlier period. Revenue of $644.4 million increased 19% year-over-year but missed the consensus expectation of $650.9 million, according to market data compiled before the release.
The earnings report highlighted a significant improvement in profitability that caught investors' attention. Core Gentex gross margin reached 35.5%, a 300 basis-point expansion from the fourth quarter of 2024 and the highest level since the first half of 2021. Consolidated gross margin improved to 34.8% from 32.5% in the prior year.
"While core Gentex revenue was essentially flat, performance within our primary markets of North America, Europe, and Japan/Korea grew approximately 3% quarter-over-quarter, outpacing a 2% decline in light-vehicle production in those regions," said Steve Downing, President and CEO, in the earnings announcement.
The margin expansion came despite tariff-related costs that pressured profitability. Management attributed the improvement to favorable product mix, ongoing operational efficiencies, and purchasing cost reductions. Neil Boehm, Chief Operating Officer and Chief Technology Officer, noted the company has "taken deliberate steps to improve our operating cost structure" through early-retirement programs and reduced third-party spending.
Operating income for core Gentex climbed 25.3% year-over-year to $112.5 million, while consolidated income from operations reached $120.1 million, up from $89.8 million in the fourth quarter of 2024. Net income increased to $93.0 million from $87.7 million in the prior-year quarter.
Gentex returned substantial capital to shareholders during the quarter, distributing a total of $425.9 million including $319 million in share repurchases. The company has been actively buying back its stock despite trading near a 52-week low of $19.98 in October. Shares rose about 2% in pre-market trading Friday to $24.04, well below the 52-week high of $29.10.
The earnings release comes amid recent analyst skepticism. Baird downgraded the stock on January 29 and reduced its price target to $25, citing concerns about overgrowth and challenges in European and Chinese markets. Of eight analysts covering the company, three rate it a buy while five recommend hold, with an average target price of $29.44, according to current market data.
Looking ahead, Gentex provided guidance for calendar year 2026 with revenue expected between $2.60 billion and $2.70 billion, up from the $2.43 billion reported for 2025. The company anticipates gross margin to remain strong at 34-35%. For 2027, revenue is projected to reach $2.75 billion to $2.85 billion.
The company is investing in new technologies including next-generation Full Display Mirrors, mirror-integrated driver monitoring systems, and dimmable sunroof glass, showcased at CES 2026. These products position Gentex to benefit from growing demand for safety and automation features in vehicles, even as light-vehicle production faces headwinds in key markets.
Gentex's ability to expand margins during a period of flat revenue growth demonstrates operational discipline that may appeal to value-oriented investors. The company currently trades at a forward price-to-earnings ratio of 11.79 with a dividend yield of 2.01%, and institutional ownership exceeds 98%.