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

Zacks Equity Research

On Aug 6, we issued an updated research report on Autoliv, Inc. ALV.

The Stockholm, Sweden-based company develops, manufactures and markets a wide range of automotive safety systems, which majorly includes passive safety systems.

In second-quarter 2019, the company’s earnings beat the Zacks Consensus Estimate. However, the figure declined year over year. Its revenues also declined year over year in the quarter. The company’s profitability was strained by high raw material expenses and a severe decline in LVP.

Autoliv’s gross margin is under pressure mainly due to raw material and launch-related costs along with currency volatility. Further, RD&E expenses, and lower capacity utilization of supply-chain production and logistic systems are other headwinds. In the coming quarters, product introductions are expected to keep the company’s costs at high levels.

For 2019, Autoliv anticipates light-vehicle markets to witness a slump due to softening consumer confidence, trade tariffs and regulatory changes. Per IHS, the U.S. market will be down while Europe and China markets are expected to gain traction in the second half of 2019.

However, the company regularly launches innovative products to bolster sales. It has also received many awards for the same. Additionally, the company is ramping up its product launch targets to increase organic growth.

In the past six months, shares of Autoliv have underperformed the industry it belongs to. Shares of the company have declined 7.3% compared with the industry’s fall of 0.5%.


Zacks Rank & Stocks to Consider

Currently, Autoliv has a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the auto space are Fox Factory Holding Corp FOXF, CarMax, Inc. KMX and Gentex Corporation GNTX, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 16.7%. In the past year, shares of the company have rallied 17%.

CarMax has an expected long-term growth rate of 12.6%. In the past year, shares of the company have moved up 13.6%.

Gentex has an expected long-term growth rate of 5%. In the past year, shares of the company have returned 13.9%.

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