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Today (5/16/19) VVV hosted its 1st analyst day. It slightly lowered its LT earnings algorithm: EBITDA +6-8% (was HSD) and EPS +HSD (was +HSD-LDD). While we have some concerns on NA/Int’l targets, we’ve updated our annual scenario model through 2022E to incorporate this guidance (Exhibit 3). By 2022E Quick Lubes is still just over 50% of EBITDA, which we don’t think is big enough for investors to fully appreciate yet. Shares were flat.

We wanted to flag a few highlights in today's Wolfe Research Auto Daily...

Delphi – A Rare Clean Quarter in Supplier Land
We were encouraged by Q1, and we took a closer look at how this company can improve significantly in 2020. 

Aptiv – Secular Growth Remains Strong, Overshadowed by Short-term Costs
Aptiv’s Q1 was fine… but their full year 2019 outlook was not (Downward revision due to:  1) China and Europe; 2) A large resin cost spike).   We still see this company as an impressive secular grower (9 ppts GoM this year).  But the multiple reflects this.

Dana – A solid quarter; focus on the incrementals
Dana’s Q4 was solid (though we point out that the full year expectation will require significantly better incremental margins in 2H).  The bigger focus of investors, however, is cyclicality.  We see this debate continuing (despite our view that downside risk is less than perceived).  And this could cap upside.

We wanted to flag a few highlights in today's Wolfe Research Auto Daily...

Growing incrementally more cautious on suppliers
Discussions with Europe-based Consultants reinforced our concerns about the disruptive impact of European CO2 regs.  These could have dramatic implications for revenue, margins, and product portfolios.  We adjusted our target for MGA.  Others are also exposed.
 
GM’s a bit more cautious on China, but we see other catalysts as overwhelming
China demand may be weakening again.  But we still see a series of positives on the horizon for GM.

Delphi – Neutral into the print. Some risk already priced in
It’s been a tough earnings season for suppliers in the midst of spending to prepare for late 2019 launches. DLPH fits that category but has already sold off in sympathy with others and we believe has some company-specific reasons to expect modest margin improvements over the course of 2019.

Aptiv -  More conservatism in original guidance leads to lower risk into the print
Generally see low risk of big variances. Quarter looks fine, and some conservatism in the full-year guide (China production and tariffs) should offset any modest revenue headwinds.

VVV - Still see North America Volumes as the be-all and end-all
We don't have visibility into stabilizing volumes. Absent stabilizing volumes, we think deleverage & fixed cost absorption could overwhelm any incremental upside to unit economics from recent base oil declines.

VVV held its FQ1 earnings conference call this morning (02/07.19). Results missed expectations across the board. Gross profit of $183m missed cons. of $199m and our $196m. North America $GP/Gallon was down 15% y/y to $3.39, missing our $3.60 estimate. Adj. EPS of $0.27 missed consensus of $0.31 and our $0.29. VVV also lowered 2019 guidance, although we question whether it’s low enough. VVV shares -21%.