Why Is Autoliv (ALV) Up 2.8% Since the Last Earnings Report?
Zacks Equity Research
Updated
A month has gone by since the last earnings report for Autoliv, Inc. ALV. Shares have added about 2.8% in the past month, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Autoliv Q1 Earnings Beat, FY17 Guidance Unchanged
Autoliv reported adjusted earnings of $1.65 per share in the first quarter of 2017 that beat the Zacks Consensus Estimate of $1.52. However, earnings decreased 0.6% from $1.66 per share reported a year ago. Earnings per share, on a reported basis, amounted to $1.62 in the first quarter of 2017 compared with $1.51 in the year-ago quarter.
Autoliv reported record consolidated quarter revenues of $2.61 billion, up 7.3% year over year, beating the Zacks Consensus Estimate of $2.58 billion. Excluding negative currency translation effects and the impact of acquisitions, organic sales improved 4.4%, exceeding the company’s expectation of more than 3%.
Operating income increased 6% to $217.6 million (or 8.3% of sales) from $205.2 million (or 8.4% of sales) in the year-ago quarter. Adjusted operating margin was 8.4% in the reported quarter, higher than the company’s expectation of around 8%.
Shares of the company fell around 6.1% to close at $100.19 on Apr 28 on the company’s lower year-over-year earnings and conservative guidance.
Segment Results
Sales at the Passive Safety segment rose 2.6% year over year to $2.04 billion in the reported quarter. Excluding negative currency translation effects, organic sales increased 4.7%. The segment’s operating income rose 7% to $204.9 million (10% of sales) from $191.5 million (9.6% of sales) in the prior-year quarter. Operating margins were strengthened due to higher sales and lower costs, partly offset by higher expenditure on research and development as well as other costs to support growth.
Sales at the Electronics segment grew 27.8% year over year to $583.3 million. Organic sales were up 2.9%. The Autoliv-Nissin Brake Systems (ANBS) joint venture impacted sales positively. Operating income from the division rose 15.3% to $13.6 million (2.3% of sales) from $11.8 million (2.6% of sales) in the prior-year quarter. Margins were negatively affected due to higher expenditure on research and development as well as long-term development plans.
Financial Position
Autoliv had cash and cash equivalents of $1.24 billion as of Mar 31, 2017, higher than the $1.16 billion reported as of Mar 31, 2016. Long-term debt was $1.32 billion as of Mar 31, 2017, down from $1.5 billion as of Mar 31, 2016.
In first-quarter 2017, the company’s cash flow from operations decreased to $149.2 million from the year-ago figure of $200.5 million. Net capital expenditures rose to $121.4 million from the year-ago recorded figure of $91.2 million.
Dividend
On Feb 20, 2017, Autoliv declared a quarterly dividend of $0.60 per share for the second quarter of 2017, up $0.02 from the previous level. The dividend will be paid on Jun 1, to shareholders on record as of May 17, 2017.
Guidance
Autoliv expects organic sales to grow by around 2% year over year in the second quarter of 2017. Currency translations are expected to have a negative impact of about 3% on sales. This impact is likely to result in consolidated sales decline of 1%. The adjusted operating margin in the second quarter is expected to be around 8.5%.
Autoliv still expects full-year 2017 organic sales to increase around 4%. The recent acquisitions and currency translation are expected to have an adverse impact of less than 1% on sales. Based on these factors, consolidated sales are likely to rise around 3%. Adjusted operating margin, excluding costs for capacity alignments and antitrust related matters, is still likely to be 8.5% in 2017.
Tax rate for full-year 2017 is likely to be around 30%, down from 32% expected previously. Operating cash flows are anticipated to be about or more than $0.8 billion, excluding any discrete items, while capital expenditure for supporting the company’s growth plans are still projected to be in the range of 5–6% of sales.
2015 onward, Autoliv signed various agreements with original equipment manufacturers to supply replacement airbag inflators. The company expects the deliveries to be above 30 million units over the 2015–2018 period.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been seven revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 7.5% due to these changes.
Autoliv, Inc. Price and Consensus
Autoliv, Inc. Price and Consensus | Autoliv, Inc. Quote
VGM Scores
At this time, Autoliv's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
