Stoneridge Looking Solid

Stoneridge, Inc. (SRI - Snapshot Report) is aggressively cutting costs and benefiting from the growth of the commercial vehicle market. Increased use of electronics in vehicles is also benefiting the company. We rate the shares a Buy with a target of $15.

Currently, shares of Stoneridge, Inc. are trading at 15.8x our 2008 EPS estimate of $0.82. Stoneridge is aggressively cutting costs and benefiting from the growth of the commercial vehicle market.

As part of its cost-control program, the company has relocated its manufacturing facilities to low-cost regions such as Mexico, China, and Estonia. Currently, the company is pursuing its plan to cease manufacturing at its facilities in Sarasota, Florida, Mitcheldean and U.K. locations and consolidating production at its Lexington, Ohio; Suzhou, China; and Tallinn, Estonia facilities.

The company continues to evaluate its cost structure on a product-by-product basis to determine the most competitive manufacturing locations for its products. In conjunction with lean manufacturing initiatives, this will help optimize operating costs for Stoneridge. The company is also focusing on raw material cost reduction through hedging transactions for copper and fixed-price supplier agreements for zinc.

Stoneridge hedges approximately 20% of its projected copper purchases. The company expects to complete its restructuring activities by 2008, the benefits of which would range between $8 million and $12 million in 2009 and beyond. Stoneridge has shown improved sales growth in the commercial vehicle market.

Read the full analyst report on SRI