Autoliv's (ALV) Margins Under Strain on Escalating Costs

We issued an updated research report on Autoliv, Inc. ALV on Feb 12.

In fourth-quarter 2018, Autoliv reported adjusted earnings of $1.42 per share, missing the Zacks Consensus Estimate of $1.62. Moreover, the bottom line declined from the prior-year quarter figure of $2.29.

Autoliv’s gross margin is under strain primarily due to raw material and launch-related costs, and effects of currency translation. Moreover, rise in product launches will increase costs for the company. Though the company kept the target of attaining more than $10 billion in sales and around 13% in adjusted operating margins in 2020 unchanged, it does not expect to reach the target in 2020.

Further, Autoliv’s sales are under pressure due to unfavorable conditions in key markets, which are keeping a lid on global auto demand. This is primarily due to lower demand for new vehicles in China along with volume reduction in Europe. Notably, the volume reduction resulted from the switch in the emission-testing procedure to WLTP by the European Union.

Over the past 30 days, the Zacks Consensus Estimate for earnings in the current quarter and the current year has decreased 9.3% and 9.6%, respectively, to $1.66 and $7.10.

In the past three months, shares of Autoliv have underperformed the industry it belongs to. Over this time, the stock has lost 11.1% against the industry’s growth of 0.5%.

Autoliv currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. ALSN, Oshkosh Corp. OSK and American Axle & Manufacturing Holdings, Inc. AXL, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Allison Transmission has an expected long-term growth rate of 10%. Over the past three months, shares of the company have risen 3.3%.

Oshkosh has an expected long-term growth rate of 11.3%. Over the past three months, shares of the company have surged 18.3%.

American Axle & Manufacturing has an expected long-term growth rate of 8.1%. Over the past three months, shares of the company have risen 17%.

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Autoliv, Inc. (ALV) : Free Stock Analysis Report
 
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