Three Automotive-related Earnings Releases to Watch
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Domestically, automotive related demand has allowed for the economy to remain steady, while other sectors have stumbled in early 2013. In addition to the major automakers, suppliers to the industry are the likely beneficiaries of this sales expansion.
As the crux of earnings season is upon us, several of these entities will be posting results. The reports may provide insight as to the possibility of a continued surge in sales or a curbing of growth. Related stocks may well react to the reports positively, and interested investors should keep an eye on them.
I'll focus on these three:
TRW Automotive Corp.
TRW (NYSE: TRW), its largest unit a producer of chassis systems, names as its largest customer Volkswagen (includes Audi, Skoda, Seat, and Porsche). Volkswagen recently posted weak sales in Europe, with overall sales about flat, a factor that could restrain results for TRW somewhat. Notably, Volkswagen, along with Ford and Chrysler contributed solid revenue gains to TRW in 2012.
The challenge for TRW has been cost excesses, and management is taking initiatives to lift margins through restructuring actions this year. This factor appears to be largely confined to Europe and any signs of a turnaround in that region would be favorable to TRW. In all, for now, its sizable European presence is a bit of a burden.
TRW shares have sold off to a degree of late. As such, the valuation is considerably low based on projected share earnings. Any upside earnings surprise may well give the stock a boost when results are released later this month.
Autoliv (NYSE: ALV) manufactures automotive safety systems, including airbags and seatbelts. The Swedish company attributes 30% of its revenues to Europe, where it is also suffering under tough market conditions. Another 35% of fourth-quarter sales were from the Americas region. Asia contributed another 25% of the total. Sales in each region, with the exception of Europe, have been on the rise.
Earnings are anticipated to have declined in the March period, despite likely sales growth overall. The company is embarking on a capacity rightsizing that might well bring costs in line with the current demand environment.
Still, a rebound in Europe is probably required for Autoliv to outperform earnings expectations and revive the stock. In all, it is also trading at an attractive valuation and should be considered by those willing to withstand the risks.
Superior (NYSE: SUP), a producer of aluminum wheels, is struggling on the cost side. Reduced efficiencies are resulting from a loss of sales volumes without an accompanying cost decline. To address this factor, management is building a new manufacturing facility in Mexico.
Ford and General Motors are its largest customers, followed by Chrysler. Given strong sales numbers at those major U.S. firms, Superior may well have enjoyed a better March period than previously anticipated. Such an outperformance could well give the stock a boost.
Regardless, Superior is a worthwhile selection for those seeking dividend income. It yields about 3.7% at the current quotation. More risk-averse investors might well want to await an earnings upturn before jumping in.
Damon Churchwell 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!