We maintain our Neutral recommendation on Superior Industries International Inc. (SUP - Analyst Report). Headquartered in Van Nuys, California, Superior Industries is one of the world’s largest designers and manufacturers of cast aluminum road wheels for the automotive industry.
Superior Industries’ aluminum road wheels are sold to OEMs including Audi, BMW, Chrysler LLC, General Motors Company (GM - Analyst Report), Fiat, Ford Motor Co. (F - Analyst Report), Jaguar, Land Rover, Mazda, Mercedes Benz, Mitsubishi, Nissan Motor Co. Ltd (NSANY - Snapshot Report), Skoda, Subaru, Suzuki, Toyota Motor Corp. (TM - Analyst Report), Volkswagen and Volvo AB (VOLVY) for their automobiles and light trucks.
The company released its third quarter earnings on October 28, 2011. Net income of $4.2 million or 16 cents per share was much lower than an income of $10.4 million or 39 cents in the year-ago quarter.
Net sales in the quarter climbed 12.7% year over year to $207.1 million, primarily driven by an increase in the pass-through pricing of aluminum. Net sales from the U.S. operations rose 11% to $77.0 million while the same from the Mexico operations climbed 14% to $130.1 million.
Higher aluminum prices remain a headwind for Superior Industries, thereby forcing it to increase its average selling price of wheels by a considerable amount. This is threatening its wheel demand.
Moreover, high competition in the automotive components supply industry and the company’s significant exposure to the Big Three – Ford Motor, General Motors and Chrysler are bound to adversely impact its long-term prospects.
However, Superior Industries’ broad product portfolio, wide customer base and a debt-free balance sheet will significantly help the company in mitigating the adverse factors.