On Sep 12, 2013, we maintained our Neutral recommendation on
). We appreciate the company's improved second-quarter 2013
performance. Autoliv has a stable market share in both airbag
modules and seat belts in North America, Europe and Asia. The
company also aims to tap the huge potential offered by low-cost
countries. However, we are concerned about the stiff competition
and its high dependence on some customers.
Why the Reiteration?
On Jul 19, 2013, Autoliv reported second quarter 2013 earnings of
$1.44 per share, beating the Zacks Consensus Estimate by 5 cents.
Earnings improved 8.3% from $1.33 per share reported in the
second quarter of 2012 on the back of lower effective tax rate
and favorable interest expense.
Consolidated revenues rose 5.2% to $2.19 billion, beating the
Zacks Consensus Estimate of $2.17 billion. The year-over-year
improvement in revenues was driven by increasing focus on safety
by leading Chinese car manufacturers.
Following the release of the second-quarter results, the Zacks
Consensus Estimate for fiscal 2013 increased marginally by 0.2%
to $5.68 per share. Moreover, the Zacks Consensus Estimate for
fiscal 2014 rose 0.8% to $6.31 per share. Currently, the company
retains a Zacks Rank #3 (Hold).
Autoliv benefits from its expansion in the low-cost countries
such as Romania and China. The company has opportunities in these
countries due to the rising demand for automobile protection
products resulting from the strong demand for light vehicles in
these regions. In addition, the cost of production in these
countries is lower than that in higher-cost countries.
Autoliv is benefiting from its presence in China and focuses on
providing automotive safety systems to the Chinese auto
manufacturers. The company recently announced an investment of
$50 million to build a textile center in China, which will
fulfill the rising demand for airbags in the region.
However, Autoliv faces challenges from customer concentration.
General Motors Company
) is the largest customer of Autoliv and commands 15% of total
sales in 2012.
Ford Motor Co.
) and Renault-Nissan are next in line and each of them account
for 11% of sales. The top 5 customers represent about 54% of
sales and the top 10 represent 83% of sales. Thus, the loss of
any key customer could significantly affect the company's
Other Stocks to Look For
American Axle & Manufacturing Holdings Inc.
), a Zacks Rank #1 (Strong Buy) stock, is currently performing
well in the original auto and truck industry.
AUTOLIV INC (ALV): Free Stock Analysis Report
AMER AXLE & MFG (AXL): Free Stock Analysis
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis
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