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Why Did Autoliv Fall ~1.5% on June 29?

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Jun. 30 2016, Published 11:11 a.m. ET

Autoliv’s price movement

Autoliv (ALV) has a market cap of $9.6 billion. Its stock fell by 1.5% to close at $108.47 per share on June 29, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -11.5%, -11.5%, and -12.2%, respectively, on the same day. ALV is trading 10.1% below its 20-day moving average, 10.0% below its 50-day moving average, and 6.0% below its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Value ETF (JKI) invests 0.81% of its holdings in Autoliv. The ETF selects from the 70%–90% range of market capitalization, sorting value stocks based on ten factors. The YTD price movement of JKI was 4.6% on June 29.

The market caps of Autoliv’s competitors are as follows:

  • Delphi Automotive (DLPH): $17.1 billion
  • Magna International (MGA): $13.8 billion
  • Gentex Corporation (GNTX): $4.5 billion

Autoliv’s collaboration with Toyota Motor

In a press release on June 29, 2016, Autoliv stated, “Autoliv, Inc. (ALV), the worldwide leader in automotive safety systems, is cooperating with Toyota in their voluntary recall of ~1.4 million vehicles of the Toyota Prius and Lexus CT200h.” The issue in these vehicles stems from defective airbag inflators. The expected cost for Autoliv is in the range of $10 million–$40 million, net of expected insurance recoveries, as published in the company’s 10Q statement on April 29.

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Performance in fiscal 1Q16

Autoliv (ALV) reported fiscal 1Q16 net sales of $2.4 billion, a rise of 11.8% over $2.2 billion in fiscal 1Q15. Sales of airbag products, seatbelt products, passive safety electronic products, and active safety products rose by 12.2%, 1.6%, 17.5%, and 50.7%, respectively, between fiscal 1Q15 and fiscal 1Q16. The company’s cost of sales as a percentage of net sales fell by 2.5%, and its operating income rose by 156.5%.

In fiscal 1Q16, ALV’s net income and EPS (earnings per share) rose to $133.2 million and $1.51, respectively, compared with $35.7 million and $0.40 in fiscal 1Q15.

Autoliv’s cash and cash equivalents fell by 12.9%. Its inventories rose by 7.8% between fiscal 4Q15 and fiscal 1Q16. In fiscal 1Q16, its current ratio and debt-to-equity ratio fell to 1.7x and 1.1x compared with 1.8x and 1.2x, respectively, in fiscal 4Q15.

Quarterly dividend

Autoliv declared a quarterly dividend of $0.58 per share on its common stock. The dividend will be paid on September 1, 2016, to shareholders of record at the close of business on August 18, 2016.

Projections

Autoliv (ALV) made the following projections for fiscal 2Q16:

  • The company expects net sales growth of ~10%.
  • It expects sales growth of ~6% from merger and acquisition activities (Autoliv-Nissin Brake Systems and MACOM).
  • It expects an adjusted operating margin of 8.5%. This excludes costs for capacity alignments and antitrust matters. This projection includes ~$10 million in integration and purchase accounting costs for the joint venture with Nissin Kogyo.

Autoliv (ALV) made the following projections for fiscal 2016:

  • The company expects net sales growth of more than 7%.
  • It expects sales growth from merger and acquisition activities (Autoliv-Nissin Brake Systems and MACOM) of ~5%.
  • It expects an adjusted operating margin of 9.0%. This excludes costs for capacity alignments and antitrust matters. This projection includes $20 million–$30 million in integration and purchase accounting costs for the joint venture with Nissin Kogyo.
  • The tax rate of ~29% excludes any discrete items.
  • The company expects an operating cash flow of ~$0.8 billion.

In the next part of this series, we’ll look at McCormick & Company’s latest appointment of a new chief financial officer and executive vice president.

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