Autoliv's (ALV -0.34%) financial results were all over the pace last year. After driving past expectations in the first quarter, the auto safety product maker disappointed in the second quarter before meeting its targets in the third. However, the company finished the year much like it started by posting fourth-quarter results that were above guidance. That momentum appears poised to continue given what the company sees up ahead.
Autoliv results: The raw numbers
|
Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$2.7 billion |
$2.6 billion |
4.8% |
|
Adjusted operating income |
$262.6 million |
$242.9 million |
8.1% |
|
Adjusted EPS |
$2.03 |
$1.71 |
18.7% |
Source: Autoliv. EPS=earnings per share.
Image source: Getty Images.
What happened with Autoliv this quarter?
Results came in ahead of expectations.
- Heading into the quarter, Autoliv anticipated that organic sales would be "virtually flat." However, net sales rose 4.8%, and even after adjusting for the 3.7% positive impact from foreign exchange fluctuations, organic sales were up 1.1%, which was still ahead of expectations. Meanwhile, its adjusted operating margin was 9.6% for the quarter, which certainly matched its view that this metric would be "more than 9%."
- The company's passive safety segment led the way this quarter, delivering a 2% increase in organic revenue thanks to strong seatbelt sales. Driving this growth was higher sales of more advanced and higher value-added seatbelt systems.
- Revenue from Autoliv's electronic segment slipped 1.2% on an organic basis due to a 7.9% drop in the sales of restraint control systems, which are mainly airbag control modules and remote sensing units. Partially offsetting that weakness was a 4.7% increase in sales of active safety systems such as radar and camera systems and a 1.5% rise in brake system sales.
- The higher-than-expected revenue and strong margins drove the accelerated growth in adjusted operating income. That said, while adjusted earnings improved, the unadjusted number plunged 94.7% versus the year-ago period to just $12.6 million, or down 56.9% on a per share basis to $0.72. Driving that decline was a $100 million non-cash charge relating to the company's 51% stake in ANBS, which is the brake systems joint venture that started up in early 2016.
What management had to say
Autoliv CEO Jan Carlson commented on the quarter by saying:
The fourth quarter ended a year of records and exciting announcements. We are pleased that the fourth quarter sales and gross profit were the highest we have reported for any quarter. The full year 2017 was also the best year we have reported for sales and gross profit. Building on this solid base, we look forward with great expectations, as order intake in 2017 reached new historic highs for each of our Passive Safety and Electronics segments. This includes new record high order intake for Active Safety and for Restraint Control Systems, while ANBS almost managed to repeat its strong 2016 order intake.
As Carlson notes, Autoliv finished last year on a high note, setting records for sales and profits. Furthermore, the company recorded a high volume of incoming orders, which positions it for accelerated growth in 2018.
Looking forward
Overall, the company expects organic sales growth of 7% this year. Driving that increase will be the company's passive safety segment, which should deliver 2% organic sales growth during the first quarter, while full-year sales should be up 10%. This sales ramp will more than offset an expected 3% decrease in organic sales from the electronics segment.
That said, while 2018 will be a down year for the electronics segment, 2019 should be much better. Autoliv is preparing for that reacceleration by separating this business into a stand-alone company, which it recently named Veoneer. Autoliv expects to complete the spinoff in the third quarter, just in time for investors to directly benefit from the rebound.
