On Jan 10, we maintained our Neutral recommendation on
) based on raised guidance, dividend hike and expectation of
organic sales growth. However, we are concerned about stiff
competition and high dependence on a few customers. Moreover, the
Eurozone crisis is weighing on the company's performance.
Why the Reiteration?
On Oct 24, 2013, Autoliv reported third-quarter 2013 earnings of
$1.29 per share, lagging the Zacks Consensus Estimate of $1.33.
Earnings improved 5% from $1.23 per share reported in the third
quarter of 2012. The improvement can be attributed to lower
effective tax rate and interest expense.
Consolidated revenues rose 9% year over year to $2.12 billion,
beating the Zacks Consensus Estimate of $2.07 billion. The rise
was driven by higher organic sales in all regions, particularly
Europe, along with favorable vehicle mix in China.
Following the release of third-quarter results, the Zacks
Consensus Estimate for Autoliv's 2013 earnings fell 0.7% to $5.64
per share. The Zacks Consensus Estimate for 2014 increased 0.3%
to $6.32 per share.
Autoliv increased its dividend for the first quarter of 2014 by
4% to 52 cents per share. The dividend will be payable on Mar 6,
2014, to shareholders of record as on Feb 20, 2014. The company
also renewed the mandates to repurchase up to 3.2 million shares.
These strategies will help maintain the efficient capital
structure of the company.
The company expects consolidated and organic sales growth of 9%
in the fourth quarter with an operating margin of 9%, excluding
capacity alignments and anti-trust investigations costs. For
full-year 2013, the company increased the guidance for organic
sales growth to 5% from the previous estimate of 4%. Operating
margin is expected to be around 9%.
However, we are concerned about the Eurozone crisis due to
operating inefficiencies related to underutilized capacity,
capacity alignment action and strong growth in steering wheels,
which further pressurizes the capacity alignment. The company
also faces a challenging situation in Brazil owing to
Other Stocks That Warrant a Look
Better-ranked stocks in the industry in which Autoliv operates
Modine Manufacturing Co.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
AUTOLIV INC (ALV): Free Stock Analysis Report
GENTEX CORP (GNTX): Free Stock Analysis
MODINE MANUFACT (MOD): Free Stock Analysis
VISTEON CORP (VC): Free Stock Analysis Report
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