Before the market open today, Autoliv (ALV) delivered disappointing earnings for the third quarter.
But the stock still climbed on news that China is considering cutting the tax on car purchases to 5% from 10% in an effort to stimulate the country’s auto market at a time when overall economic growth is slowing.
For a day, the future outweighed the past–which actually makes good sense since it was weakness in sales to China’s automotive sector that led to Autoliv’s third quarter earnings miss. Wall Street had been looking for the company to report earnings of $1.58 a share but Autoliv announced earnings per share of just $1.35. Sales from continuing operations rose 4.1% year over year to $2.03 billion against a Wall Street projection of $2.07 billion, Operating income from continuing operations was ahead 15.1% to $193 million.
Sales in China’s car market, the largest in the world, are on track for the first annual drop in two decades as trade tensions with the United States drag on demand. In September passenger car purchases by dealerships fell 13% to 1.9 million units. For the first nine months of the year, deliveries are down 1.1%. As part of the tariff war with the Trump administration China has increased its tariff on vehicles imported from the United States to 40% while lowering the tariff on imports from other countries to 15%.
Shares of Autoliv closed up 3.73% today at $84.82 after being ahead by 6.32% earlier in the day.
Autoliv is a member of my Jubak Picks 12-18 month portfolio.
