Stoneridge Misses, Swings to Loss in Q2

Stoneridge Inc. ( SRI - Snapshot Report ) 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. With this, 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.

Excluding the contribution of PST, revenues went up 2.8% to $195.8 million during the quarter due to rise in production volumes in the agricultural and off-road markets.

Cost of goods sold increased 18.3% to $180.6 million compared with $152.7 million in the second quarter of 2011. SG&A expenses escalated 71.7% to $52.0 million or 22.2% of sales from $30.3 million or 15.9% in the year ago quarter. Operating income slashed 78% to $1.6 million in the quarter from $7.4 million in the year-ago quarter.

Financials

Stoneridge had cash and cash equivalents of $39.2 million as of June 30, 2012 compared with $78.7 million as of December 31, 2011. Long-term debt was $218.9 million as of June 30, 2012, compared to $227.9 million as of December 31, 2011.

In the first six month period ended June 30, 2012, operating cash flow was $15.3 million compared to a cash outflow of $23.1 million in the prior-year period. Capital expenditures were $14.4 million in the period, compared to $14.1 million a year ago.

Outlook

For 2012, Stoneridge expects revenues between $970 million and $1.01 billion. Gross margin is projected in the range of 24.5% to 26.5%. Operating margin is expected in the range of 4.5% to 6.0%. The company also anticipates earnings per share in the band of 75 cents to $1.30 for the full year.

Our Take

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.

Products diversity creates competition, which varies from market to market. The company competes with Delphi Automotive PLC ( DLPH - Snapshot Report ) and TRW Automotive Holdings Corp. ( TRW - Analyst Report ) . Currently, it retains a Zacks #5 Rank, which translates into a short-term (1 to 3 months) Strong Sell rating.