Admit it: If that annoying alarm hadn’t gone off when you start your car, you probably wouldn’t think much of your seatbelt these days, because it’s become quite reflexive to buckle up. This means that you are probably unaware of Swedish society Autoliv Inc. (NYSE:ALV).
Autoliv is the world’s leading manufacturer of seat belts and airbag systems, with a market share of 43%.
If you take a look at the Autoliv chart, you’ll immediately understand why it might be a stock to watch: shares rose 10.20% on July 21, following the company’s second-quarter earnings report.
Using MarketBeat’s Autoliv revenue data, you can see that the company topped both revenue and revenue.
The company, headquartered in Stockholm, manufactures passive automotive safety products, primarily airbags, including steering wheels and inflators, and seat belts.
The company’s sales in 2022 totaled $8.8 billion, of which 66% consisted of airbag and steering wheel products, with the remaining 34% consisting of seat belt products. It has customers and business operations in Europe, the Americas, China, Japan and other smaller Asian markets.
Asian automakers are becoming increasingly important, mainly driven by growth in Japan. As a group, Asian manufacturers accounted for around 43% of global sales in 2022, with Japan-based customers accounting for around two-thirds of that total.
China accounted for around 5% of global sales in 2022. Europe-based brands accounted for 30%, while US-based manufacturers accounted for 25%.
Stellantis among fast growing customers
Globally, one of Autoliv’s fastest growing customers is Stellantis SA (NYSE: STLA)manufacturer of brands such as Chrysler, Dodge, Fiat, Jeep, Ram and many others, including Maserati.
Autoliv also lists General Motors Co. (NYSE: GM) And Ford Motor Co. (NYSE: F) among customers who put the pedal to the metal with their purchases.
So what is driving all this growth?
Several factors are at work. Freight costs are down from 2022 levels; supply chain pressures that affected Autoliv’s customers and suppliers have been alleviated; and the shortage of chips, which affected customers, eased.
One of the issues that plagued the company during the height of supply chain disruptions and Covid-related shutdowns, particularly in China, was customers canceling orders.
Acceleration of revenue growth
Profits fell in 2022 for these reasons, but growth accelerated in the last two quarters. In the second quarter report, Autoliv noted that customer call volatility has improved.
Revenues have grown at double-digit rates for the past four quarters, but the latest quarter was the best in a while, with sales up 27% and profits up 114%.
For the full year, Wall Street is targeting earnings growth of 48% to 6.50 per share. This was recently revised upwards. Next year, that will rise another 43%, to $9.30 per share.
Autoliv reiterated its guidance for the full year, saying it expects sales growth of around 15%.
Price increases and cost reductions
In a statement in the earnings release, CEO Mikael Bratt said, “We have achieved the price offsets from customers that we anticipated,” referring to the price increases. The company has also embarked on a structural cost reduction program. The first steps include closing manufacturing plants in Germany and England, as well as a sales office in Italy.
The company intends to reduce its total workforce by up to 11% as it seeks to reduce operations after the effects of inflation in 2022.
With the post-earnings price movement, Autoliv stock broke above a cutaway buy point above $98. Buyers were in the driver’s seat, as sales were 259% above average.
Shares closed on July 21 at $102.78, 4.9% above their buy point, a clear indication of institutional support.
How to Buy a Gap Breakaway
Here is one way to consider buying a stock that is significantly higher in spread due to earnings or some other development: On the stock chart, find the price after the first five minutes of trading. This gives you leeway to eliminate the noise in the first few minutes. Using MarketBeat charts, you can set a one-minute view of price action. If you are using bars or candlesticks, compared to a line chart, you can get the most detailed view.
For example, using the chart, you can see that after five minutes on July 21, Autoliv shares were trading at $98.08. To avoid getting sucked into perfectly normal profit taking after a gap-up, the ideal buy point would not be above $102.98.
That’s not too far above the current price, but investors missing that could soon find another opportunity if the stock pulls back to support a key moving average, such as 10-day or 21-day.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.