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Autoliv's (ALV) Q1 Earnings Beat Estimates, Shares Rise

Share price of Autoliv, Inc. ALV increased 7% to $122.47 on Apr 29, after the company reported adjusted earnings of $1.66 per share in the first quarter of 2016 that beat the Zacks Consensus Estimate of $1.50. Also, earnings increased 16.9% from $1.42 per share reported a year ago. Earnings per share, on a reported basis, amounted to $1.51 in first-quarter 2016 compared with 40 cents in first-quarter 2015.
 

 

Consolidated revenues improved 11.8% year over year to $2.43 billion, exceeding the Zacks Consensus Estimate of $2.35 billion. Excluding negative currency translation effects and the acquisition impact, organic sales rose 15%, surpassing the expectation of more than 10% growth.

Operating income increased significantly to $205.2 million (or 8.4% of sales) from $80 million (or 3.7% of sales) in the year-ago quarter.

Segment Results

Sales at the Passive Safety segment rose 8.6% year over year to $2 billion in the reported quarter. Excluding negative currency translation effects, sales increased 13%. The improvement in organic sales was driven by higher sales in most of the regions and better sales of replacement inflators. The segment’s operating income soared 203% to $191.5 million (9.6% of sales) from $63.2 million (3.5% of sales) in the prior-year quarter.

Sales at the Electronics segment rose 30% year over year to $456.4 million. Excluding negative currency translation effects, sales were up 27%. Organic sales growth was backed by strong organic sales growth in passive safety electronics across all regions and active safety from North America and Europe. Operating income from the division advanced 31.1% to $11.8 million (2.6% of sales) from $9 million (2.5% of sales) in the prior-year quarter.

Financial Position

Autoliv had cash and cash equivalents of $1.16 billion as of Mar 31, 2016, down from $1.36 billion as of Mar 31, 2015. Total debt fell to $1.53 billion from $1.64 billion as of Mar 31, 2015.

In the first quarter of 2016, Autoliv’s cash flow from operations increased to $200.5 million from $84.2 million a year ago. Net capital expenditures decreased to $91.2 million from $128 million recorded in the year-ago period.

Dividend

On Feb 16, 2016, Autoliv declared a quarterly dividend of 58 cents per share for the second quarter of 2016. The dividend will be paid on Jun 2, to shareholders on record as of May 18, 2016.

Guidance

Autoliv expects organic sales growth of around 10% in second-quarter 2016. Sales will benefit from the recent acquisitions of ANBS and MACOM by 6%. However, currency translation will have a 1% adverse impact on sales. Based on these factors, consolidated sales are expected to grow around 15%. Adjusted operating margin, excluding costs for capacity alignments and antitrust related matters, is likely to be around 8.5% in second-quarter 2016. The operating margin guidance includes expected integration and purchase accounting costs for the joint venture with Nissin Kogyo of $10 million.

For full-year 2016, the company’s organic sales are expected to increase around 7%, higher than the previous forecast of 5% growth. Sales will benefit from the recent acquisition of ANBS and MACOM by 5%. However, currency translation will have a 1% adverse impact on sales. Based on these factors, consolidated sales are expected to grow more than 11%, higher than the previous estimate of 2% growth. Adjusted operating margin, excluding costs for capacity alignments and antitrust related matters, is likely to be more than 9% in 2016. The operating margin expectation includes estimated integration and purchase accounting costs for the joint venture with Nissin Kogyo of $20–$30 million.

Tax rate is likely to be around 29%. Operating cash flows are anticipated to be about $0.8 billion, excluding any discrete items, while capital expenditure for supporting the company’s growth plans are projected to be at the higher end of the guidance range of 5–6% of sales.

From 2015 onward, Autoliv has signed various agreements with OEMs to supply replacement airbag inflators. The company expects that deliveries will be above 30 million units over the 2015–2018 period.

Zacks Rank

Currently, Autoliv carries a Zacks Rank #3 (Hold).

Some better-ranked automobile stocks include Lear Corp. LEA, Wabash National Corp. WNC and Oshkosh Corporation OSK. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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AUTOLIV INC (ALV): Free Stock Analysis Report
 
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