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Autoliv (ALV) Beats on Q1 Earnings, Expects Q2 to be Rough

Zacks Equity Research
·3 mins read

Autoliv, Inc. ALV reported adjusted earnings of 88 cents per share in first-quarter 2020, beating the Zacks Consensus Estimate of 58 cents. However, the bottom line decreased from the prior-year figure of $1.20 per share. Per IHS Markit, global light vehicle production declined around 24% year over year during first-quarter 2020, in turn denting the firm’s earnings and sales.

The company reported net sales of $1,846 million in the quarter, down from the prior-year figure of $2,174 million. However, the figure beat the Zacks Consensus Estimate of $1,795 million.

Adjusted operating income fell 18% year over year to $136 million. Adjusted operating margin from continuing operations was 7.4% in the reported quarter, lower than the prior-year quarter’s 8%.

Autoliv, Inc. Price, Consensus and EPS Surprise


Autoliv, Inc. Price, Consensus and EPS Surprise
Autoliv, Inc. Price, Consensus and EPS Surprise

Autoliv, Inc. price-consensus-eps-surprise-chart | Autoliv, Inc. Quote

Segmental Performance

Sales in the Airbags and Associated Products segment totaled $1,202.2 million, lagging the Zacks Consensus Estimate of $1,448 million. Moreover, revenues from the segment were down around 17% year over year. Revenues were impacted by headwinds in the form of lower inflator revenues and bleak sales of inflatable curtains, steering wheels, driver airbags, and side airbags.

Sales in the Seatbelts and Associated Products segment totaled $643.6 million, down 11.4% from the prior-year quarter. The figure also missed the consensus mark of $726 million. Weaker revenues from China, Europe and India negatively impacted its performance.

Financial Position

Autoliv had cash and cash equivalents of $907.2 million as of Mar 31, 2020. Long-term debt was $2.2 billion, increasing from $1.7 billion as of Dec 31, 2019. Long-term debt-to-capital ratio stands at 52%. Net capital expenditure increased to $118 million from the year-ago figure of $108 million.

Cost-Cut Measures Amid COVID-19

The company has undertaken several measures to conserve cash to sail through coronavirus-induced uncertainty and financial crisis. It has canceled its quarterly dividend scheduled for Jun 4 and suspended future dividends until further notice. Capex reduction and suspension of other discretionary spending have been enforced in a bid to preserve financial flexibility. As we know, the firm has already withdrawn $1.1 billion of cash from the revolving credit facility.

The company’s executive officers and non-employee board members have agreed to take pay cuts to combat the crisis. While the executive officers have reduced their base salaries by 20% for second-quarter 2020, the non-employee board members have decreased their annual base retainer by 20% for the same period.

Annual View Revoked, Q2 to be Tougher

Autoliv has withdrawn its 2020 guidance amid uncertainty surrounding the market. Further, the firm expects to take a bigger hit in the second quarter on the back of factory closures by automakers. IHS Markit expects second-quarter light vehicle production to decline 45% in second-quarter 2020. Amid the gloomy scenario, Autoliv anticipates a sharp decline in earnings and sales, going forward.

Zacks Rank & Key Picks

Autoliv currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked players in the auto sector include Modine Manufacturing Company MOD, Spartan Motors, Inc. SPAR and Unique Fabricating, Inc. UFAB, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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