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On Friday, Goldman Sachs maintained a Buy rating on Autoliv, Inc. (NYSE:ALV) stock, with a steady price target of $136.00. The firm acknowledged the potential for further challenges that Autoliv may face due to ongoing de-stocking and market volatility. Despite these concerns, the firm's analyst pointed to several factors that could support the company's margin in the second half of the year, including cost-saving measures, final pricing negotiations, and research and development reimbursements.
Autoliv is anticipated to report third-quarter adjusted EBIT of $242 million, with a margin of 9.7%, which is slightly below the consensus estimate of $260 million and a 10.0% margin. The company had adjusted its guidance in July to reflect a more conservative global Light Vehicle Production (LVP) outlook for 2024, predicting a year-over-year decrease of 3%, which is a downward revision from the previously anticipated 1% decline. This forecast remains more conservative compared to the latest S&P outlook, which estimates a 2.1% decrease.
The analyst highlighted the risks associated with de-stocking in the U.S. and unfavorable customer mix in China. Additionally, production stoppages at BMW (ETR:BMWG) were noted as a potential source of volatility for Autoliv. Despite these risks, Goldman Sachs remains optimistic about Autoliv's positioning within the European Union supplier space. The firm expects Autoliv's margins for fiscal years 2024 and 2025 to be approximately 5.4 and 6.0 percentage points above its peers' average, respectively, and anticipates a total shareholder return of 11.5% in 2024.
Looking towards the mid-term, Goldman Sachs believes that Autoliv will benefit from an increase in the penetration of safety products and stricter safety regulations worldwide, which are expected to drive growth in the cost per vehicle (CPV). The firm also sees Autoliv as well positioned to establish itself with rapidly growing domestic Original Equipment Manufacturers (OEMs) in China, given its strong market share in passive safety products, which is over 40%, and its localized capacity.
In other recent news, Autoliv Inc. has faced several financial adjustments following its Q2 2024 performance. The company reported lower-than-expected earnings for the June quarter, with revenue at $2.61 billion and earnings per share (EPS) at $1.87. In response, Autoliv revised its full-year 2024 revenue growth forecast down to 1% from the previously expected 5%. Despite this, the company anticipates a stronger second half with margins between 11-12% and plans to reduce its indirect workforce by up to 2,000, aiming to save $50 million in 2024.
Deutsche Bank initiated coverage on Autoliv with a Buy rating and a price target of $116.00, citing potential for the company's earnings to grow in the medium to long term. However, Deutsche Bank noted some concerns regarding Autoliv's recent reduction in its full-year 2024 outlook. Goldman Sachs maintained a Buy rating on Autoliv, highlighting the company's commitment to executing its cost-saving strategies and adapting to inflationary pressures through effective pricing negotiations.
Meanwhile, Mizuho Securities, Baird, and BofA Securities adjusted their price targets for Autoliv, influenced by the company's Q2 earnings and revenues. Mizuho Securities adjusted its price target for Autoliv from $135 to $125, maintaining an Outperform rating. Baird lowered its price target from $128 to $111, retaining a neutral rating. BofA Securities, despite holding a buy rating, reduced its price target from $145 to $133. These recent developments reflect the ongoing market challenges and the company's recent performance.
InvestingPro Insights
As Goldman Sachs maintains a positive outlook on Autoliv, Inc. (NYSE:ALV), recent data from InvestingPro aligns with some of the firm's sentiments. With a market capitalization of approximately $7.73 billion and a P/E ratio that has adjusted to 10.91 over the last twelve months as of Q2 2024, Autoliv is trading at a discount relative to its near-term earnings growth. This is further evidenced by a PEG ratio of just 0.18, indicating potential undervaluation based on earnings growth expectations.
InvestingPro Tips highlight that Autoliv has a history of returning value to shareholders, having raised its dividend for three consecutive years and maintaining dividend payments for 28 consecutive years. The company's dividend yield stands at 2.84%, with a recent growth of 3.03% in dividends, showcasing its commitment to shareholder returns. Additionally, management's aggressive share buyback strategy signals confidence in the company's future performance.
While Autoliv's gross profit margin at 18.09% may suggest room for improvement, the firm's strategic positioning in the European Union supplier space and its potential to capitalize on increasing safety regulations worldwide could offset this concern. Investors looking for additional insights can find more InvestingPro Tips, including analysis on Autoliv's debt levels and stock price volatility, at InvestingPro's comprehensive platform.
For those closely following Autoliv's financial health, the company's revenue growth over the last twelve months was 8.25%, with a total revenue of $10.57 billion. Despite a slight quarterly revenue decline of -1.14% in Q2 2024, the company's overall performance remains robust. Autoliv's next earnings date is scheduled for October 18, 2024, which will provide further clarity on the company's trajectory and its ability to navigate the current market challenges highlighted by Goldman Sachs.
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