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Autoliv's (ALV) Q3 Earnings, Revenues Beat Estimates

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Autoliv, Inc. (ALV - Free Report) reported adjusted earnings of $1.63 per share in the third quarter of 2016 that comfortably surpassed the Zacks Consensus Estimate of $1.38. Also, earnings increased 6.5% from $1.53 per share reported a year ago. Earnings per share, on a reported basis, amounted to $1.56 in third-quarter 2016 compared with $1.12 in third-quarter 2015.

Consolidated revenues improved 12.7% year over year to $2.46 billion and beat the Zacks Consensus Estimate of $2.45 billion. Excluding negative currency translation effects and the impact of acquisitions, organic sales rose 6.1%, slightly exceeding the company’s expectation of around 6% growth.

Operating income increased 21.1% to $191.1 million (or 7.8% of sales) from $157.8 million (or 7.2% of sales) in the year-ago quarter. Adjusted operating margin was 8.1% in the reported quarter, higher than the company’s expectation of around 7.5%.

Shares of the company fell around 5.7% to close at $97.34 on Oct 27.

Segment Results

Sales at the Passive Safety segment rose 5.6% year over year to $1.9 billion in the reported quarter. Excluding negative currency translation effects, organic sales increased almost 6%. The segment’s operating income improved 30.9% to $190.8 million (10% of sales) from $145.8 million (8.1% of sales) in the prior-year quarter. High capacity alignment costs boosted operating margins in the quarter.

Sales at the Electronics segment surged 45.4% year over year to $577.4 million. Organic sales were up 8%. The Autoliv-Nissin Brake Systems (ANBS) joint venture positively impacted sales. Operating income from the division fell 56.1% to $5 million (0.9% of sales) from $11.4 million (2.9% of sales) in the prior-year quarter. Margins were negatively affected due to costs related to the formation of ANBS.

Financial Position

Autoliv had cash and cash equivalents of $1.18 billion as of Sep 30, 2016, in line with Sep 30, 2015. Total debt dropped to $1.54 billion from $1.55 billion as of Sep 30, 2015.

In the first nine months of 2016, the company’s cash flow from operations increased to $574.2 million from $429.2 million a year ago. Net capital expenditures rose to $339.5 million from $333.7 million recorded in the year-ago period.

Dividend

On Aug 15, 2016, Autoliv declared a quarterly dividend of 58 cents per share for the fourth quarter of 2016. The dividend will be paid on Dec 1, to shareholders on record as of Nov 16, 2016.

Guidance

Autoliv expects organic sales to remain flat year on year in the fourth quarter of 2016. Recent acquisitions are expected to have a positive impact of about 6% on sales. However, currency headwinds are likely to have a negative impact of almost 1%, resulting in consolidated sales growth of over 5%. The adjusted operating margin in the fourth quarter is expected to be over 9%.

Autoliv reiterated its expectations for full-year 2016. The company’s organic sales are projected to increase around 7%. The recent acquisitions of ANBS and MACOM should a positive impact of about 5% on sales. However, currency translation will have a 1% adverse impact on sales. Based on these factors, consolidated sales are expected to rise 10%.

Adjusted operating margin, excluding costs for capacity alignments and antitrust related matters, is likely to be more than 8.5% in 2016. The operating margin expectation includes estimated integration and purchase accounting costs of $20–$30 million for the joint venture with Nissin Kogyo.

Tax rate for full-year 2016 is likely to be around 28%, down from the previous expectation of 29%. Operating cash flows are still anticipated to be about $0.8 billion, excluding any discrete items, while capital expenditure for supporting the company’s growth plans continues to be projected in the range of 5–6% of sales.

From 2015 onward, Autoliv has signed various agreements with original equipment manufacturers to supply replacement airbag inflators. The company expects that deliveries will be above 30 million units over the 2015–2018 period.

AUTOLIV INC Price, Consensus and EPS Surprise

 

AUTOLIV INC Price, Consensus and EPS Surprise | AUTOLIV INC Quote

Zacks Rank

Currently, Autoliv carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space include The Goodyear Tire & Rubber Company (GT - Free Report) , Horizon Global Corporation and Standard Motor Products Inc. (SMP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Goodyear has seen its earnings estimates move north over the last 60 days.

Horizon Global has a long-term expected growth rate of 10%.

Standard Motor has a long-term expected growth rate of 15%.

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