AB Volvo (VOLVY) reported earnings of SEK 1.22 per share (18 cents per ADR) in the second quarter of 2014, beating the Zacks Consensus Estimate of 15 cents. The results were higher than SEK 0.99 per share (15 cents per ADR) earned in the year-ago quarter.
Net income amounted to SEK 2.5 billion ($378.6 million) in the said quarter, increasing 21.5% from the second quarter of 2013.
During the reported quarter, net sales of Volvo came in at SEK 72.6 billion ($11 billion), in line with the year-ago quarter. After making adjustments for currency exchange rate fluctuations, sales fell 1% year over year. The decline was due to lower sales in South America and Asia, which offset the increased sales in Europe and North America.
Operating income, excluding restructuring charges, amounted to SEK 4.3 billion ($651.1 million), surging 31.9% from the second quarter of 2013. Operating margin, excluding restructuring charges, came in at 6%, improving from 4.5% in the year-ago quarter.
Segment Results
Net sales in the Industrial operations segment totaled SEK 70.9 billion ($10.7 billion), almost in line with the year-ago quarter figure. Industrial operations comprise Trucks, Construction Equipment, Buses, Volvo Penta and Corporate Functions, Group Functions & Other businesses of Volvo.
Trucks: Net sales in the Trucks segment increased 4% year over year to SEK 48.2 billion ($7.3 billion) in the second quarter of 2014.
Construction Equipment: Net sales in the segment amounted to SEK 14.6 billion ($2.2 billion), down 9% year over year. After making adjustments for currency exchange rate fluctuations as well as acquisition and divestitures of units, net sales fell 10% from the second quarter of 2013.
Buses: Net sales in this segment came in at SEK 4.8 billion ($726.9 million), increasing 19% year over year. After making adjustments for currency exchange rate fluctuations as well as acquisition and divestitures of units, net sales increased 18% from the second quarter of 2013.
Volvo Penta: This segment’s net sales declined 7% year over year to SEK 2 billion ($302.9 million). After making adjustments for currency exchange rate fluctuations as well as acquisition and divestitures of units, net sales fell 9% from the second quarter of 2013.
Corporate Functions, Group Functions & Other: Net sale in this segment amounted to SEK 1.9 billion ($287.7 million).
Sales in the Customer Finance segment amounted to SEK 2.5 billion ($378.6 million) in the reported quarter, up 3% year over year. After making adjustments for currency exchange rate fluctuations as well as acquisition and divestitures of units, net sales improved 2% from the second quarter of 2013.
Financial Position
Cash and cash equivalents came in at SEK 14.2 billion ($2.1 billion) as of Jun 30, 2014, declining from SEK 27 billion ($4.2 billion) as of Dec 31, 2013. Cash used in operating activities amounted to SEK 4.4 billion ($673.3 million) for Volvo in the first half of 2014.
Currently, Volvo carries a Zacks Rank #4 (Sell). Better-ranked automobile stocks worth considering include Meritor, Inc. (MTOR), Magna International Inc. (MGA) and China Automotive Systems Inc. (CAAS). All these stocks sport a Zacks Rank #1 (Strong Buy).
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