DDAIF Mercedes Benz Group AG (PK)

Autoliv Inc. (ALV) reported first-quarter 2014 adjusted earnings of $1.43 per share, marginally beating the Zacks Consensus Estimate of $1.42 per share. Earnings improved 8.3% from $1.32 per share reported in the first quarter of 2013.

Including costs for capacity alignment and antitrust investigations in the first quarter of 2014, earnings per share amounted to $1.38, up 7% from $1.29 in the year-ago quarter.

Consolidated revenues rose 7.5% year over year to a record high of $2.3 billion, in line with the Zacks Consensus Estimate. The improvement was driven by higher-than-expected vehicle production in North America, Western Europe and South Korea, partly offset by weaker-than-expected production volumes in China and South America.

Operating income surged 5.1% to $191.7 million (or 8.4% of sales) from $182.4 million (or 8.5% of sales) in the year-ago quarter. Excluding capacity alignment and antitrust investigation costs, operating margin was 8.6%, which was higher than the company’s guidance of 8%.

Segment Results

Sales of Airbag products (including steering wheels and passive safety electronics) rose 7.4% year over year to $1.49 billion due to high sales of passive electronics, leather wrapped steering wheels and knee airbags. Excluding negative currency effects, Airbag sales improved 7.8%.

Sales of Seatbelt products improved 2.1% to $703 million driven by higher sales of active seatbelts, primarily in Europe. Organic sales rose 2.5% over the prior-year quarter.

Sales of Active Safety products (automotive radar, night vision systems and vision camera with driver assist systems) surged 68.5% to $106.9 million year over year. Excluding positive currency effects, organic sales improved 68.2%. The increase was due to the demand for radar products by Daimler AG (DDAIF) for its Mercedes cars. Demand for radars from Acura, Cadillac and Jeep and night vision products from both Daimler and BMW also contributed to the improvement.

Financial Position

Autoliv had cash and cash equivalents of $1.1 billion as of Mar 31, 2014, up from $990.5 million as of Mar 31, 2013. Long-term debt decreased to $638.3 million from $633.1 million as of Mar 31, 2013.

In the first quarter of 2014, Autoliv’s cash flow from operations improved to $185 million from $141 million a year ago. Net capital expenditures increased to $93 million from $86 million in the year-ago period.

Share Buyback

Autoliv spent $94 million to repurchase about 1 million shares at an average price of $94.61.

Dividend Update

Autoliv announced its quarterly dividend of 52 cents per share for the second quarter of 2014. The dividend will be paid on Jun 5, 2014 to shareholders of record as of May 21, 2014.

Guidance

Autoliv expects organic sales growth of about 5% and projects operating margin to be around 9% in the second quarter of 2014, excluding capacity alignments and antitrust investigation costs.

For full-year 2014, the company anticipates organic sales growth of 5%. Autoliv also announced an operating margin guidance of around 9%, excluding capacity alignments and antitrust investigation charges.

Expenses related to the ongoing capacity alignment program are expected to be in the range of $20–$40 million in 2014, while tax rate should be around 29%. Operating cash flows are expected to be more than $700 million and capital expenses are projected to vary between 4.5–5% of sales.

Currently, Autoliv holds a Zacks Rank #3 (Hold). Some stocks performing well in the same industry include Superior Industries International, Inc. (SUP) and Magna International Inc. (MGA), both carrying a Zacks Rank #1 (Strong Buy).

 
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