Why Is Autoliv (ALV) Up 9.7% Since Last Earnings Report?

A month has gone by since the last earnings report for Autoliv (ALV). Shares have added about 9.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Autoliv 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 drivers.

Autoliv (ALV) Q3 Earnings Miss Estimates, 2018 View Cut

Autoliv reported adjusted earnings of $1.35 per share in third-quarter 2018, missing the Zacks Consensus Estimate of $1.58. Moreover, the bottom line declined from the prior-year quarter’s tally of $1.47.

During the quarter under review, Autoliv reported net sales from continuing operations of $2.03 billion, reflecting 4.1% rise year over year. While the Zacks Consensus Estimate for the same was pegged at $2.07 billion. Quarterly organic sales grew 6.4%, majorly driven by a 22% organic sales increase in the Americas. However, this uptrend was partly offset by weak demand for light-vehicle production in China and Europe.

Operating income from continuing operations gained 15.1% to $193 million. Adjusted operating margin from continuing operations was 9.5% in the reported quarter, higher than the prior-year quarter’s figure of 8.6%.

Financial Position

Autoliv had cash and cash equivalents of $534 million as of Sep 30, 2018, lower than $958 million reported as of Sep 30, 2017. Long-term debt was $1.68 billion as of Sep 30, 2018, witnessing rise from $1.31 billion as of Sep 30, 2017.

At the end of third-quarter 2018, the company’s operating cash flow increased to $238 million from the year-ago figure of $218 million. Net capital expenditure decreased to $117 million from the year-ago figure of $142 million.

Guidance

For 2018, Autoliv anticipates organic sales growth for continuing operations of around 6%. Combined with a positive currency translation of approximately 2%, the company expects a consolidated sales boost of approximately 8%. The previously anticipated figure was 10%, which included the effect of currency conversion. Further, the adjusted operating margin for continuing operations is projected to be around 10.5% compared with 11% mentioned earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -15.58% due to these changes.

VGM Scores

At this time, Autoliv has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Autoliv has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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