Autoliv Inc. Earnings Growth Driven by Strength in the U.S. and Europe

Autoliv Inc. reported second-quarter results before the market opened on Friday. The auto safety manufacturer delivered a very strong quarter as it hit the high end of its own expectations for organic sales growth and adjusted operating margin, which drove its revenue and earnings past analysts' expectations. As a result of that strong showing and its outlook for more of the same, the company doesn't see any speed bumps on the road to meet its full-year guidance.

A look at the numbersAutoliv reported revenue of $2.3 billion, which was actually down 4% compared to the second quarter of last year. However, revenue did beat analysts' expectations by $10 million. Furthermore, after excluding the negative impact of currencies, the company's organic sales actually grew by $237 million, or 6.1%, which was on the higher end of its guidance of organic sales growth of "around 6%."

Driving this strong organic sales growth was the company's Airbags division, which reported sales of $1.3 billion. That was up 7.1% on an organic basis and was driven mainly by airbags and inflatable curtains in Europe and North America, as well as strong steering wheel sales in Europe. With an even stronger showing was the company's Active Safety segment, which organically grew revenue by 25.6% to $132.1 million. Growth in this segment was driven by radar and vision systems. Meanwhile, the company's Seatbelt and Passive Safety Electronics segments delivered below-average growth as organic revenue increased by 2.9% and 0.7%, respectively.

The overall strength of the company's organic sales drove very robust growth in operating income, which was up 49.7% year over year to $208.7 million. Meanwhile, adjusted earnings per share increased to $1.62 per share, which was up 11.7% year over year and also beat analysts' expectations by $0.08 per share. The other big contributing factor to strong earnings growth was the company's adjusted operating margin, which improved from 9.3% in last year's second quarter to 9.5% this quarter. That was also at the higher end of the company's own guidance range of "around 9%." Among the drivers of the improved margins was a positive product mix and raw material savings.

A look at outlook Autoliv is expecting its solid results to continue in the second half of 2015. Despite some uncertainty in China as its economic growth rate is starting to slow, the company sees growth elsewhere accelerating next quarter. Its current expectations are for its organic sales growth to increase by more than 7% for the third quarter while its adjusted operating margin is expected to be around 9%. That said, overall sales, which include the impact from currencies, are expected to slip by 2% as the company expects to endure a 9% hit from currencies.

For the full year, the company sees much of the same, as sales are expected to decline by 2% overall. However, adjusting for currencies, organic sales growth is expected to be more than 6% for the full year. Meanwhile, the company expects robust adjusted operating margin of around 9.5% for the full year.

Investor takeawayAutoliv delivered a pretty strong quarter once we strip out the impact of foreign currencies. The company delivered strong growth in its core Airbags segment with even more robust growth in its smaller Active Safety segment, which drove stronger-than-expected organic sales growth and better adjusted operating margins. The company expects its sales to accelerate next quarter, putting it on pace to meet its full-year targets.

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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.

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