Share price of Superior Industries International, Inc. (SUP) decreased 3.7% on Nov 4 to $18.47 after the company reported third-quarter 2014 adjusted earnings of 7 cents per share, missing the Zacks Consensus Estimate of 18 cents. Earnings per share decreased 63.2% from 19 cents in the comparable quarter of 2013. Meanwhile, net income declined 63.5% to $1.9 million from $5.2 million in the year-ago quarter.
On a reported basis, Superior Industries reported net loss of $2.4 million, or 9 cents per share. The third-quarter results were affected by expenses associated with the closure of the Rogers, AR manufacturing facility and expenses related to the company’s recent proxy contest, strategic market assessment and the sales of aircraft.
Revenues for the quarter decreased 7.9% to $176.4 million, missing the Zacks Consensus Estimate of $183 million. The decline was driven by lower volume. Unit shipments decreased 11% to 2.6 million compared with 2.9 million units recorded in the third quarter of 2013.
Gross profit decreased 52.5% to $7.3 million (4.1% of sales) from $15.4 million (8% of sales) in the prior-year quarter. The decline can be attributed to lower unit shipments and $4.2 million of costs related to the closure of the Rogers facility.
Selling, general and administrative expenses (SG&A) increased 20.6% to $9.95 million (6% of sales) in the quarter, from $8.25 million (4% of sales) in the prior-year quarter. The increase was due to higher expenses associated with its recent proxy contest, strategic market assessment and the sales of aircraft.
Operating loss was $2.6 million or 2% of sales compared with operating income of $7.2 million or 4% of sales a year ago.
Capital Deployment
In early third-quarter 2014, Superior Industries completed the repurchase of $30 million worth of shares under its previously announced repurchase program. Subsequent to the closure of the third quarter, Superior’s board of directors approved a new share repurchase program of up to $30 million worth of shares.
The company is also constructing a new manufacturing plant in Mexico that is expected to start production by early 2015. The plant will initiate full-scale production by the second half of 2015.
Facility Closure
Superior Industries is planning to close the Rogers, AR facility by the end of this year. This closure will lead to labor cost savings of $15 million owing to the retrenchment of 500 employees.
Financial Details
As of Sep 28, 2014, Superior Industries had a working capital of $221.2 million, including cash, cash equivalents and short-term investments of $86.9 million. This compared unfavorably with a working capital of $284.8 million including cash, cash equivalents and short-term investments of $203.1 million as of Dec 29, 2013. Investments in various plants, along with the new wheel manufacturing plant being constructed in Mexico and the repurchase of the company’s common stock, led to the decline in working capital. Notably, the company had no bank or other interest-bearing debt at the end of the quarter.
Other Stocks to Consider
Superior Industries carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks worth considering include Gentex Corp. (GNTX), Toyota Motor Corporation (TM) and STRATTEC Security Corporation (STRT), each carrying a Zacks Rank #1 (Strong Buy).
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