Automotive safety supplier Autoliv laid an egg with its first-quarter earnings report, sending the stock lower. Inflation was a big problem, as was low auto production across the industry, itself the result of issues ranging from the shortage of semiconductors to Covid-19.
The results aren't good new for auto investors. Now they have to decide if the Autoliv result is a one-off situation or the start of a trend for parts suppliers this earnings season.
Friday morning, Autoliv reported earnings per shares of 45 cent from $2.1 billion in sales. Wall Street was looking for EPS of $1.05 a share from $2.2 billion in sales.
That disappointment came with a cut to management's financial forecasts. Back in January, the company expected to generate about $950 million in cash flow from operations. Now it is telling investor to expect $750 million to $850 million.
Operating profit margins should come in at about 6% for the full year, down from prior guidance of about 10%. Autoliv's long-term goal is about 12%.
Shares were down 7.8% in premarket trading, at about $71.50. S&P 500 and Dow Jones Industrial Average futures were both off by about 0.4%. Coming into Friday trading, Autoliv stock had fallen about 25% year to date.
"The first quarter of 2022 saw adverse impacts on an already distressed global supply chain, leading to increased cost inflation as well as lower global [light vehicle production]," said CEO Mikael Bratt in the company's news release. "Customer demand visibility decreased, and customer call-off volatility increased leading to significantly higher premium freight and transportation costs."
Autoliv's customers are auto makers. Their production schedules have been snarled by parts shortages and Covid lockdowns in China.
On the positive side, the company expects to increase sales by about 15% year over year in 2022. Autoliv supplies safety products and systems, and more safety content is being added for each car produced. Still, in January management was predicting 20% organic sales growth.
The message is clear: Things are difficult right now in the industry. Auto investors will have to hope that other parts companies have an easier time managing inflation and production volatility.
The outlook for car makers themselves is questionable too, but Tesla's (TSLA) first-quarter results offer investors some hope about the numbers from the likes of General Motors (GM) and Ford Motor (F).
Better than expected vehicle pricing helped Tesla produce an big earnings beat that sent shares higher. Consumers are still willing to pay higher prices and Tesla focused on producing premium products as it allocated its limited supply of parts. A better mix of vehicles could help other auto makers' results too.