Summary:
Autoliv reported third-quarter 2014 adjusted earnings of $1.25 per share, down 4.6% year over year. The earnings missed the Zacks Consensus Estimate of $1.40 per share. Consolidated revenues rose 4.2% year over year to $2.21 billion, missing the Zacks Consensus Estimate of $2.27 billion. The weakness was due to unfavorable vehicle mix and decline in vehicle production in China. Autoliv expects organic sales growth of about 5.5% and operating margin of around 9% in 2014. While the planned change in operating structure is expected to enhance growth and company benefits, backed by a strong balance sheet and innovative product launches, we are concerned about stiff competition and high dependence on a few customers. Moreover, low vehicle production in some regions could weigh on the company's performance. As a result, we maintain a Neutral recommendation.

Overview:

Autoliv Inc. (ALV), based in Stockholm, Sweden, is a holding company that operates through two principal subsidiaries: Autoliv AB (AAB) and Autoliv ASP (ASP). The company manufactures occupant restraint systems for automobiles and has a product portfolio consisting primarily of safety airbags, seat belts and steering wheels.

The Swedish corporation, AAB, develops, manufactures and supplies automotive safety systems to the automotive industry. These include seatbelts, seatbelt pretensioners, frontal airbags, side-impact airbags, steering wheels and seat sub-systems. The Indiana Corporation, ASP, designs, develops and manufactures airbag modules, inflators, airbag cushions, seatbelts and steering wheels.

Airbag products accounted for about 64.5% of revenues in the first nine months of 2014, while seatbelt products and active safety products contributed 30.4% and 5.1%, respectively. Most major automobile manufacturers in the world are served by Autoliv. It segregates results geographically into Europe, Americas, China, Japan, and the Rest of the World.

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