Autoliv Inc. (ALV) reported second-quarter 2014 adjusted earnings of $1.45 per share, missing the Zacks Consensus Estimate of $1.54 per share. Earnings decreased 2% from $1.48 per share reported in the second quarter of 2013.
Including costs for capacity alignment and antitrust matters, earnings per share amounted to 89 cents in the second quarter of 2014 compared with $1.44 in the same quarter of 2013.
Consolidated revenues rose 8.4% year over year to $2.38 billion, marginally beating the Zacks Consensus Estimate of $2.33 billion. The revenue increase was higher than the company’s expectation of a 5% rise. The improvement was driven by higher-than-expected vehicle production in North America, Europe, Japan and South Korea. This was partially offset by decline in light vehicle production in Brazil. In addition, there was higher demand from China. Demand for active safety products also increased.
Operating income declined 28.1% to $139.4 million (or 5.8% of sales) from $194 million (or 8.8% of sales) in the year-ago quarter. Excluding capacity alignment and antitrust investigation costs, operating margin stood at 9.3%, higher than the company’s guidance of 9%.
Segment Results
Sales of Airbag products (including steering wheels and passive safety electronics) rose 8.5% year over year to $1.54 billion on high sales of side airbags, knee airbags, safety electronics and steering wheels. Excluding negative currency effects, Airbag sales improved 7.4%.
Revenues from Seatbelt products improved 4.5% to $724.4 million driven by higher sales in China, North America and Europe. Rising demand for more advanced and higher value added seatbelt systems globally boosted the segment’s revenues. However, decline in light vehicle production in South America partially marred the results. Excluding positive currency effects, organic sales improved 3.5%.
Sales of Active Safety products (automotive radar, night vision systems and vision camera with driver assist systems) surged 39.6% to $117.9 million year over year. Excluding positive currency effects, organic sales improved 39.5%. The increase can be attributed to the increased demand for radar and night vision products by Daimler. There was also strong demand for vision products by BMW.
Financial Position
Autoliv had cash and cash equivalents of $2.1 billion as of Jun 30, 2014, up from $1.04 billion as of Jun 30, 2013. Long-term debt increased to $1.8 billion from $624 million as of Jun 30, 2013.
In the first half of 2014, Autoliv’s cash flow from operations decreased to $271 million from $332.6 million a year ago. Net capital expenditures increased to $207.4 million from $174.2 million in the year-ago period.
Share Buyback
Autoliv spent $97 million to repurchase about 944,707 shares at an average price of $ 102.81 during the quarter.
Dividend Update
The company announced an increase in quarterly dividend to 54 cents per share from 52 cents, for the third quarter of 2014. The dividend will be paid on Sep 4, 2014 to shareholders of record as of Aug 20, 2014.
Guidance
Autoliv expects organic sales growth of about 6% and projects adjusted operating margin to be around 8.5% in the third quarter of 2014, excluding capacity alignments and antitrust investigation costs.
For full-year 2014, the company raised the organic sales growth guidance to 6% from 5%. Autoliv also projects operating margin of around 9%, excluding capacity alignments and antitrust investigation costs.
Expenses related to the ongoing capacity alignment program are expected to be $40 million in 2014, while tax rate should be around 29%. Operating cash flows are anticipated to be more than $700 million and capital expenses are projected to vary between 4.5–5% of sales due to rising expenditure required to support growth plans.
Currently, Autoliv holds a Zacks Rank #3 (Hold). Some better-ranked automobile stocks worth considering include China Automotive Systems Inc. (CAAS), Magna International Inc. (MGA) and Meritor, Inc. (MTOR), all of which sport a Zacks Rank #1 (Strong Buy).
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