ALV suggested margins should inflect. And the Street already believes it.
We attended ALV’s CMD, which took place at the company’s massive Airbag and Airbag Inflator complex in Utah. Our key takeaway was that ALV expects a significant margin inflection over the next few years. We can buy-in to the turnaround argument (though we are not as bullish as ALV, as we are not optimistic regarding production growth). That said, our DCF suggests that this is already in the stock.
Europe volumes – Mixed signals between sell-out (sales) and sell-in (production)
While the October European SAAR was out earlier this month, we noted that ACEA’s full wrap-up release yesterday (11/19/19) said that Oct 2019 represented the highest October unit sales in 10 years. On the other hand, the latest IHS forecast for 4Q19 Europe production deteriorated to -4.6%, the 5th negative revision in a row.