Stoneridge, Inc. (NYSE:SRI)

CAPS Rating: 3 out of 5

The Company is an independent designer and manufacturer of engineered electrical and electronic components, modules and systems for the automotive, medium- and heavy-duty truck, agricultural and off-highway vehicle markets.

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Player Avatar TrackZacks (< 20) Submitted: 10/9/2012 5:24:00 PM : Outperform Start Price: $5.01 SRI Score: +2.75

Stoneridge Lowers Guidance
By: Zacks Equity Research
October 09, 2012

Stoneridge, Inc. (SRI) lowered its revenues and earnings guidance for 2012 based on weaknesses in its global operations. However, it has kept intact its margins guidance for the year.

The company has downgraded its revenue outlook for the year to $940 million–$962 million from the previous range of $970 million–$1.01 billion. The company also anticipates lower earnings per share of 35 cents to 45 cents compared with its prior outlook of 75 cents to a penny.

The lower guidance was driven by continued weakness in the European commercial vehicle business, lower shipments to a big U.S. commercial vehicle customer, and lower-than-expected second half revenue from the company’s Brazilian operations, PST.

However, the company has kept its margins guidance for the core business (Electronics and Control Devices segments) and PST largely intact at 20.5%–22.0% and 40.0%–42.0%, respectively.

It also expects to generate significant free cash flow for the remainder of the year and eliminate or reduce the borrowing on its asset-based credit facility in North America, while reducing its debt level in Brazil.

Stoneridge witnessed a loss of $3.6 million or 13 cents per share in the second quarter of 2012, compared to a profit of $3.4 million or 14 cents in the corresponding quarter last year. The EPS missed the Zacks Consensus Estimate of a profit of 4 cents per share.

The year-over-year fall in earnings was attributable to lower sales of higher margin products owing to the weak Brazilian economy, unfavorable foreign currency translation and slow growth in the North American and European commercial vehicle markets.

Revenues rose 23% to $234.3 million in the reported quarter; however, it missed the Zacks Consensus Estimate of $247.0 million. The improvement in revenues was driven by operating benefits of the Brazilian joint venture, PST.

Headquartered in Warren, Ohio, Stoneridge is engaged in designing and manufacturing engineered electrical and electronic components, modules and systems for the commercial vehicles, agricultural, automotive, and off-highway vehicles and motorcycle markets.

The company competes with Delphi Automotive PLC (DLPH) and TRW Automotive Holdings Corp. (TRW). Currently, it retains a Zacks #2 Rank, which translates into a short-term (1 to 3 months) Buy rating. The company will release its third-quarter 2012 results on October 24.

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