We are reiterating our Neutral recommendation on
). The company is benefiting from the growing importance of
vehicle safety needs and continuous expansion into low-cost
countries, which leads to stable market share. However, Autoliv
is under pressure due to low production volume on the back of
temporary plant closures in Europe and weak demand for
Japanese-made vehicles in China.
Autoliv benefits from its expansion into the low-cost countries
of Romania and China. The company has ample growth opportunities
in these countries based on a rise in demand for automobile
protection products. The company's initiative to increase
workforce by 67% will also support its expansion program.
Expenditures in these countries are about 55% lower than
In addition, the company expects to benefit from reduction in
debt obligation, which in turn will increase operational
flexibility. Total debt declined to $655.5 million as of
September 30, 2012 from $702.0 million as of September 30, 2011
and debt-to-capitalization ratio declined to 15.1% as of
September 30, 2012 from 17.6% a year ago.
However, Autoliv faces challenges from concentrated customer
base. The top three customers, including
Ford Motor Co.
Nissan Motor Co.
General Motors Company
), accounts for a roughly 20%, 15% and 10% of the company's
sales. The top-5 contributes about 60% of sales and the top 10
represent nearly 75% of sales.
Autoliv recorded a 16.9% decline in earnings per share to $1.23
in the third quarter of 2012 from $1.48 in the same quarter of
prior year while net income dipped 15.1% to $117.5 million from
$138.4 million a year ago. With this, the company has missed the
Zacks Consensus Estimate by 19 cents per share.
The decline in profits was attributable to higher effective tax
rate, negative currency translation effects, increase in shares
outstanding, and capacity alignment and antitrust investigation
Consolidated sales ebbed 3.5% to $1.9 billion due to lower sales
in Airbag and Seatbelt segments. Excluding the adverse currency
effects and the effect of a small divestiture, organic sales rose
2% during the quarter, which is narrower than the expected
increase of 4%. The company has projected 0% to 2% growth in
organic sales for the fourth quarter of 2012 and 4% growth for
full year 2012.
Autoliv, based in Stockholm, Sweden, manufactures occupant
restraint systems for automobiles and has a product portfolio
consisting primarily of safety airbags, seat belts and steering
wheels. Our long-term (more than 6 months) Neutral recommendation
on the stock is backed by a Zacks #3 Rank, which translates into
a short-term (1 to 3 months) Hold rating.
AUTOLIV INC (ALV): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis
NISSAN ADR (NSANY): Free Stock Analysis
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