Weaker Near-Term Results Shouldn't Damage Autoliv's 'Slow And Steady' Credentials

 

Autoliv (ALV) is an unusual auto supplier in that it is neither leveraged to the two dominant growth trends in passenger vehicles - electrification and advanced driver assistance (or ADAS) - nor is it particularly vulnerable to them. Electrical vehicles will still need seatbelts and airbags, and that leaves Autoliv as more of a "slow and steady' name in the auto parts space.

Second quarter results and guidance were both disappointing, but the impact of semiconductor shortages and the likelihood that other suppliers will report similar results mitigates some of the disappointment. The bigger questions I have revolve around ongoing market share gains and whether Autoliv can consistently generate low double-digit operating margins and mid-single-digit FCF margins.

I don't love Autoliv and I think there are higher-return options to consider in the auto supplier space, but I see a lot less execution risk here than for many of those other names, and with a reasonable valuation, this could be a name that works for some investors.

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Weaker Near-Term Results Shouldn't Damage Autoliv's 'Slow And Steady' Credentials