Autoliv, Inc. (ALV) Earnings & Analysis

Latest quarter

Autoliv’s third-quarter revenue of $2.7 billion was below the consensus by −0.59%, although both figures round to $2.7 billion. Its adjusted earnings per share of $2.19 also missed the $2.21 consensus estimate.

Revenue was $2.7 billion a year earlier, while diluted earnings per share fell to $2.13 from $2.28. Autoliv said organic sales declined as growth in airbags, steering wheels and other products was outweighed by a decline in seatbelt products.

Gross margin fell to 18.4% from 19.3%. The company attributed lower gross profit partly to supplier settlement compensation received in the prior-year quarter, lower sales and higher logistics costs. Operating margin declined to 9.43% from 9.87%; Autoliv said lower gross profit and capacity alignment costs reduced operating income, partly offset by lower net research and development costs.

Free cash flow was $125.0 million, down from $153.0 million a year earlier. Autoliv attributed the decline in free operating cash flow to lower operating cash flow and higher capital spending.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Mikael Bratt said Autoliv’s sales outpaced global light-vehicle production during the quarter, correcting an earlier statement on the call that it had underperformed. He attributed the result in China to growth with Chinese automakers, which represented 58.0% of Autoliv’s China sales, up from 46.0% a year earlier. Autoliv also reported 29.0% organic sales growth in India, where it cited increasing safety content per vehicle.

Bratt told analysts that shifts in customer mix can affect regional results: vehicles exported from China to Europe may register as sales in China rather than Europe. Asked about China’s negative organic growth, he pointed to vehicle production trends and limits to the extent exports could offset lower domestic sales. He expressed confidence that Autoliv could continue growing with Chinese automakers, but declined to quantify the net outcome.

CFO Monika Grama said raw-material costs reduced adjusted operating income and that customer compensation covered most tariff costs, although tariffs still weighed on adjusted operating margin. Bratt said call-off accuracy had deteriorated since the start of the year, mainly in China, making production and inventory planning harder.

For the fourth quarter, Bratt expects higher sales volumes, engineering income and customer compensation for raw-material inflation to support margin expansion. In response to questions about cost negotiations, he said rising costs late in the year leave less time to secure compensation before year-end, an issue incorporated into the full-year outlook. He also expects raw materials to remain challenging in 2027.

On investment, Bratt said Autoliv opened a second research and development center in China and launched a virtual safety platform for automakers. Grama told analysts that the timing of investment reflected a preference for projects with higher payback.

Guidance

Autoliv narrowed its full-year 2026 adjusted operating margin guidance to around 10.5%, the low end of its previous range. Bratt attributed the change to continuing raw-material headwinds and higher logistics costs.

The company now expects capital expenditure of around 4.00% of sales, replacing its earlier ceiling. Grama said the investment timing reflects prioritization of higher-payback projects.