Autoliv, Inc. (ALV) shares are experiencing a surge on Friday, even though the company missed analysts’ earnings estimates for the third quarter. While revenue came in above expectations, hitting $2.56 billion, the company’s adjusted earnings per share fell short of the projected $1.95.
Despite the earnings miss, Autoliv reported positive developments in several key areas. The company achieved strong performance in Europe and Asia (excluding China), driven by a series of new product launches and favorable pricing strategies. Sales to Chinese domestic Original Equipment Manufacturers (OEMs) also saw a significant increase, rising by 18% compared to their 8.5% Light Vehicle Production (LVP) growth.
However, the company encountered challenges within the Chinese market due to a shift in consumer demand toward lower-safety models, leading to a decline in sales of higher-end vehicles. This shift, known as a negative mix, contributed to a decrease in the company’s adjusted operating margin to 9.3% from 9.4%.
Despite the challenges in China, Autoliv remains optimistic about its future growth prospects in the region. Mikael Bratt, President and CEO, stated that the company anticipates capturing a larger market share with Chinese domestic OEMs in the coming years, based on recent sales trends and order intake. Bratt also highlighted that negotiations for excess inflation compensation with customers are progressing as expected, although a few are still pending.
Regarding the company’s outlook for the remainder of 2024, Autoliv revised its organic sales growth projection to 1% from the previously anticipated 2%. This adjustment stems from unfavorable market mix developments. However, the company reaffirmed its guidance for the adjusted operating margin to remain within the range of 9.5% to 10.0%, although it expects to be at the lower end of this range.
As the fourth quarter typically marks a strong period for the automotive industry, Autoliv’s performance in this quarter will be crucial in determining the company’s overall financial standing for the year.