Autoliv’s 3Q Earnings Rise As Demand Picks Up; Street Says Hold

Autoliv’s 3Q adjusted earnings jumped 14% year-over-year to $1.48 per share, surpassing Street estimates of $1.19. Moreover, its revenues grew 0.5% year-on-year to $2.04 billion, beating the consensus estimate of $2.02 billion. 

Autoliv (ALV) said that profitability improved in 3Q on demand recovery and cost reduction measures. The company’s CEO Mikael Bratt said “sales outperformed organically the global light vehicle production by almost 5%, with outperformance in all major regions.” He added that “Backed by recent product launches, we expect a further pick up of outperformance in the fourth quarter.” He also said “order intake activity was slow in the third quarter, but we expect a very busy fourth quarter.”

The company now expects 2020 sales to decline by about 14.5%, compared with analysts’ expectations for revenue drop of 16%. Autoliv forecasts organic sales to fall by about 13% and adjusted operating margin of approximately 6% for 2020, reflecting “continuing uncertainty in the automotive markets.” (See ALV stock analysis on TipRanks).

Ahead of 3Q results, J.P. Morgan analyst Ryan Brinkman raised the stock’s price target to $77 (9.4% downside potential) from $59 and maintained a Hold rating on the stock. The analyst expected earnings beat in Q3 due to “much stronger” production in China. Brinkman also anticipates improved production in North America as well as in Europe regions.

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 7 Holds, 2 Buys and 1 Sell. The average price target of $80.70 implies downside potential of about 5% to current levels. Shares are up by less than 1% year-to-date.

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