Autoliv Earnings: A Real Mixed Bag

By Markets Fool.com

Autoliv reported first-quarter results before the opening bell tolled this morning. Overall, the quarter was a real mixed bag: Revenue was down and missed estimates, while profits beat expectations; however, both were greatly affected by currency. It was really easy to see both positives and negatives from the release, but the overall theme was that the report was a bit weak.

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A look at the numbers
Autoliv's revenue slipped 5.7% year over year to $2.2 billion, and that was about $20 million less than analysts were expecting to see. That said, organic sales growth, which strips out the effect of foreign currency, was actually better than expected. The company's organic sales actually grew 4%, which was better than the company's own expectations of 3% organic sales growth. If we go by that measure, then the quarter looked pretty good.

Here's a comparison of product sales with and without the effect of currency:

Product

Organic

Currency Effects

Reported Change

$

%

$

%

$

%

Airbag Products

$38.20

3.1%

($109.40)

(8.8%)

($71.20)

(5.70%)

Seatbelt Products

$22.90

3.3%

($72.50)

(10.4%)

($49.60)

(7.10%)

Passive Safety Electronics

($6.00)

(2.6%)

($14.40)

(6.2%)

($20.40)

(8.80%)

Active Safety

$33.60

3.9%

($14.10)

(9.2%)

$19.50

18.30%

Total

$88.70

3.9%

($210.40)

(9.2%)

($121.70)

(5.30%)

Note: Figures in millions of dollars.

Clearly, currency had a very noticeable impact on Autoliv's revenue. That impact was also felt on the bottom line: Operating income plunged 58.3% as the company's operating margin dropped from 8.4% to 3.7%. However, on an adjusted basis, operating margins actually improved a bit to 8.9%, which was within the company's expectations of operating margins of "around 8%."

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Currencies also affected earnings, as Autoliv only earned $0.40 per share, which was 71% less than last year's first quarter. However, on an adjusted basis, earnings only slipped 0.7% to $1.42 per share, which was actually $0.11 better than analysts were expecting. That said, Autoliv can adjust things all it wants, but cash is king, and operating cash flow dropped 54% to just $84.2 million.

A look ahead
Autoliv expects both strong organic sales growth and deep currency impacts to continue next quarter. Its current expectations are for 6% organic sales growth, along with a more than 10% impact from currencies. This will lead to a consolidated sales decline of about 4%. Meanwhile, the company sees adjusted operating margins of around 9%.

It's more of the same for its the full-year expectations. Organic sales growth is expected to be more than 6%, with strong adjusted operating margins of around 9.5% for the full year. However, it sees currencies having an 8% negative impact leading to a consolidated sales decline of 2%. That said, the company did note in its earnings press release that "the recent volatility in the currency markets has led to a heightened uncertainty regarding the potential impact of currencies on the Company's future results." So, the impact from currencies could be even greater than current expectations.

Investor takeaway
Investors who like to look at things from a glass-half-full perspective have one clear takeaway: Organic sales growth and adjusted operating margins are strong and expected to remain strong in 2015. Those who see the glass from a half-empty point of view can clearly see that currencies are having a big impact, which will continue into 2015.

Still, no matter how you view the glass, the impact of currencies is clearly going to be a negative weight on Autoliv in 2015.

The article Autoliv Earnings: A Real Mixed Bag originally appeared on Fool.com.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Autoliv. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.