BMO's Richard Carlson maintains an Outperform rating on Autoliv's stock with an unchanged $121 price target as the company's longer-term outlook remains "strong." In fact, even an in-line earnings report wouldn't have been enough to support the stock and that most of the revenue miss was due to "below-the-line items."
The company's gross margin of 21 percent was a second-quarter record and adjusted EBIT margin slightly missed at 8.4 percent versus expectations for 8.5 percent, the analyst continued. Also, despite a $110 million payment to Zenuity in the quarter and a $157 million share buyback, the company's balance sheet "remains in great shape" and under-levered with a net-debt leverage of just 0.7x.
Finally, the company did cut its full-year organic growth outlook from around 4 percent to around 2 percent, but encouragingly, full-year total sales expectations remain unchanged at up 3 percent. In addition, management continues to expect its full-year adjusted operating profit margin of around 8.5 percent.
"With the stock falling back below $110 with the overall outlook remaining strong, we believe the shares are opportunistically priced for re-entry," the analyst concluded.
Bottom line, the analyst remains "bullish on anything "safety related" and Autoliv is "the only pure play in the space."
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