Autoliv Inc. Tops Its Guidance

What happened with Autoliv this quarter?

Autoliv's organic growth and margins topped expectations.

• Autoliv's key airbag segment was solid with revenue up 5.3% to $1.3 billion as foreign exchange rates added 0.2% to top line growth. Adjustingfor this impact, organic sales increased 5.1%, driven primarily by steering wheels in Europe and inflatable curtains in Japan and China.
• Seatbelt sales were strong, up 5.8% to $631 million. That said, foreign exchange rates cut 1% off the top line, which after adjusted, resulted in organic sales growth of 6.8%. Strong growth in China and Europe drove seatbelt sales, offsetting weakness in South Korea.
• Sales of passive safety electronics were robust, up 9.4% to $240 million. Because foreign exchange rates buoyed that number by 1.4%, organic sales growth moderated to 8%, propelled by airbag control modules and remote sensing sales in China.
• Active safety products sales were also robust, up 11.6% to $138.5 million. However, acquisitions boosted sales by 3.4% while currencies negatively impacted results by 0.4%. The net effectafter adjustments was 8.6% organic sales growth, led by radar and camera sales in Europe, primarily to Mercedes and BMW.
• Finally, the company's brake control systems segment added $138.5 million to the top line due to the second-quarter start-up of the ANBS joint venture.
• In addition to the stronger-than-expected organic sales growth, Autoliv reported a better-than-predicted adjusted operating margin of 8.1%, well above its 7.5% guidance.

What management had to say

About the quarter, Autoliv CEO Jan Carlson said:

As Carlson notes, the global auto market is in a state of flux. Several international markets are strong, while the U.S. market is weakening. Those trends are certainly playing out in the recent third-quarter reports of automakers. Ford (NYSE: F), for example, reported its best pre-tax profit in Europe since 2007 while delivering record third-quarter profit in Asia-Pacific, driven by strong sales in China. On the other hand, Ford's North American sales and profitability slid. Likewise, Fiat Chrysler (NYSE: FCAU) reported higher volumes in Europe during the quarter. That helped offset weaker shipments in the U.S., allowing Fiat Chrysler to announce stronger profitability and increase its full-year guidance. The strengthening European auto market is unquestionably helping both automakers and Autoliv to mute the weaker American market.

Looking forward

Despite the strong European auto market, Autoliv sees its fourth-quarter organic revenue growth fattening out year over year due to customer call-offs. Still, the company's recent M&A transactions should drive a 6% overall improvement in revenue while it expects its operating margin to be more than 9%. That projected weakness in organic sales notwithstanding, Autoliv is sticking with its full-year outlook to deliver organic sales growth of around 7% and adjusted operating margin of more than 8.5%.

A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Matt DiLallo owns shares of Ford and has the following options: long January 2018 $10 calls on Ford. The Motley Fool owns shares of and recommends Ford. 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.