On Jun 3, we maintained our Neutral recommendation on
) based on improved first quarter 2013 earnings and stable global
market share. However, we are concerned about the decline in
revenues in the first quarter of 2013 and adverse impacts on
sales volume due to lower light vehicle production in Europe.
Why the Reiteration?
On April 26, Autoliv recorded earnings of $1.29 per share in the
first quarter of 2013, beating the Zacks Consensus Estimate by a
couple of cents. Earnings improved 20.6% year on year due to a 46
cents effect from lower capacity alignments and antitrust
investigations costs, partly offset by lower underlying operating
profit of 24 cents.
However, consolidated revenues slid 2.0% to $2.1 billion due to
negative currency effects and a small divestiture. Excluding
divestitures and effects of currency exchange, organic sales fell
Following the release of the first quarter results, the Zacks
Consensus Estimate for fiscal 2013 decreased marginally by 0.5%
to $5.64 per share. The Zacks Consensus Estimate for fiscal 2014
went down 1.1% to $6.19 per share. Currently, Autoliv retains a
Zacks Rank #3 (Hold).
Autoliv benefits from its expansion in the low-cost regions of
Romania and China. The company has opportunities in these
countries due to the rise in demand for automobile protection
products. In addition, the cost of production in these countries
is 55% of that in higher-cost countries.
Autoliv also expects to be favorably impacted by reduction in
debt obligation, which in turn will increase operational
flexibility. The company's total debt reduced to $633.1 million
from $678.0 million as of Mar 31, 2012. Consequently,
debt-to-capitalization ratio declined to 14.3% from 16.5% as of
Mar 31, 2012.
However, Autoliv faces challenges from concentrated customer
base. Its top three customers - including
Ford Motor Co.
), Renault-Nissan and
General Motors Company
) account for roughly 20%, 15% and 10% of the company's sales,
respectively. The top-5 contributes about 60% of sales and the
top-10 represents nearly 75% of sales.
Other Stocks to Look For
Tower International, Inc.
), a Zacks Rank #1 (Strong Buy) stock, is currently performing
well in the industry where Autoliv operates.
AUTOLIV INC (ALV): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis
TOWER INTL INC (TOWR): Free Stock Analysis
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