Share price of Superior Industries International, Inc. SUP rallied 6.6% to $17.86 on Aug 6 after the company reported better-than-expected second-quarter 2015 results. The company posted adjusted earnings of 28 cents per share that increased 55.6% from 18 cents recorded in the comparable quarter of 2014. Earnings also surpassed the Zacks Consensus Estimate of 15 cents.
Net income on reported basis stood at $6.5 million or 24 cents per share compared with $5 million or 18 cents in the year-ago quarter.
Superior Industries’ second-quarter results were affected by lower costs due to the closure of the Rogers, AR manufacturing facility and reallocation of production to other plants like the newest facility in Mexico. Meanwhile, earnings benefited from the cost efficiency at the other manufacturing facilities of the company.
Revenues for the quarter decreased 7.6% year over year to $183.9 million and missed the Zacks Consensus Estimate of $186 million. The decline resulted from lower volume, partially offset by higher aluminum prices. Unit shipments decreased to 2.7 million from 3 million units recorded in the prior-year quarter.
Gross profit increased 26.6% to $19.9 million (10.8% of sales) from $15.7 million (7.9% of sales) in the prior-year quarter. The increase can be attributed to improved operating costs and savings from the closure of the manufacturing facility and reallocation of production to other cost-efficient plants of the company. However, this was partially offset by lower unit volume.
Selling, general and administrative expenses increased to $8.9 million (4.8% of sales) in the quarter from $7.3 million (3.7% of sales) in the prior-year quarter. The increase was due to higher legal and general consulting fees related to the current year proxy contest and higher employee termination costs.
Operating income was $11 million (6% of sales) compared with $8.4 million (4.2% of sales) a year ago.
Capital Deployment
During the second quarter of 2015, Superior Industries completed the repurchase of 285,966 shares for $5.5 million. From Jan 1 through Aug 3, the company bought back 557,643 shares for $10.4 million, under its previously announced repurchase program worth $30 million, announced in Oct 2014.
In the reported quarter, Superior Industries announced a quarterly dividend payment of 18 cents per share.
Financial Details
For the six months ended Jun 28, 2015, Superior Industries’ cash flow from operations was $25.2 million compared with $1.5 million in the first half of 2014. The increase in cash flow was driven by favorable changes in accounts receivable, inventories and accounts payable.
Outlook
In 2015, Superior Industries expects net sales in the range of $725–$800 million. Value-added sales, which are the net sales less the value of aluminum that is passed through to customers, will likely be in the range of $325 million to $360 million. Earnings before interest, tax, depreciation and amortization (EBITDA) margins are expected to increase by 100–200 basis points over 2014. Adjusted EBITDA margin, as a percentage of value-added, is anticipated to increase 350 to 500 basis points year over year. Capital expenditures are estimated to be around $40 million, significantly lower than that incurred in 2014 as the company had invested in the new manufacturing plant in Mexico last year. Working capital is projected at around $10 million.
Superior Industries sports a Zacks Rank #1 (Strong Buy).
Stocks to Consider
Other favorably-ranked automobile stocks include Ford Motor Co. F, O'Reilly Automotive Inc. ORLY and PACCAR Inc. PCAR. All the stocks carry a Zacks Rank #2 (Buy).
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