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Stoneridge Beats, Profits Up

Zacks Equity Research

Stoneridge Inc. (SRI) posted its first-quarter 2012 earnings per share of 22 cents, surpassing the Zacks Consensus Estimate of 20 cents and year-ago earnings of 12 cents. The significant increase in earnings was attributable to higher profitability from the wiring business.

Moreover, favorable copper costs and Mexican peso exchange rates boosted earnings during the quarter. In absolute terms, profits were $5.9 million in the reported quarter, up 103%, compared with $2.9 million in the year-ago quarter.

The company’s revenues for the quarter came in at $262.3 million, up 35.9% compared with $193.0 million in the year-ago quarter. However, it was in line with the Zacks Consensus Estimate. The increase in revenues was due to outstanding performance of PST Eletronica S.A. (PST) and the company’s joint venture in Brazil. Excluding the impact from PST, the company’s revenues rose 8% to $208.6 million.

The company’s cost of goods sold was $197.1 million, an increase of 28% from the year-ago quarter. Selling, general and administrative expenses spiked 63.5% to $53.3 million in the quarter. However, operating profit was $11.8 million or 4.5% of sales, compared with $6.7 million or 3.5% of sales in the first quarter of 2011.

Stoneridge had $42.9 million of cash and cash equivalents as of March 31, 2012, down 45.5% from $78.7 million as of March 31, 2011. The decline in cash balance was driven by cash used for the final portion of the PST transaction of $19.8 million and higher accounts receivable from increased sales.

Total debt of the company was $253.2 million as of March 31, 2012, down from $267.1 million as of March 31, 2011. In the quarter, Stoneridge recorded a cash flow from operations of $5.9 million compared to cash outflow from operation of $15.5 million in the corresponding quarter of last year.

Stoneridge expects full-year 2012 revenues within the range of $1.06 billion to $1.12 billion. Revenues will be under pressure due to softness in the Brazilian and European markets. The company also anticipates earnings per share to be in the range of $1.10 to $1.30 for the full year.

Stoneridge is engaged in designing and manufacturing engineered electrical and electronic components, modules, and systems for the commercial vehicles, agricultural, automotive, and off-highway vehicles primarily in North America, Asia and Europe.

The company competes with Maxwell Technologies Inc. (MXWL) and Sparton Corporation (SPA). Currently, it retains a Zacks #3 Rank on its shares, which translates into a short-term Hold rating.

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