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Analyst Blog

On Mar 7, we downgraded cast aluminum road wheels manufacturer Superior Industries (SUP - Analyst Report) to Underperform, based on the company’s significant customer concentration risk from the Detroit Big Three and lower-than-expected fourth quarter 2012 earnings.

Why the Downgrade?

Superior Industries’ profits declined to $2.7 million or 10 cents per share in the fourth quarter of 2012 from $12.0 million or 44 cents in the same quarter of 2011. Earnings per share were substantially lower than the Zacks Consensus Estimate of 26 cents per share.

Revenues in the quarter fell 3% to $210.0 million due to flat sales volume and a reduction in average selling price due to lower aluminum prices.

Following the release of the fourth quarter results, the Zacks Consensus Estimate for 2013 decreased 17.5% to 85 cents per share. The Zacks Consensus Estimate for 2014 remained flat at 95 cents per share. Currently, Superior Industries retains a Zacks Rank #5 (Strong Sell).

Superior Industries remains under pressure due to customer concentration. The Big Three customers of the company -- Ford Motor Co. (F - Analyst Report), General Motors Company (GM - Analyst Report) and Chrysler -- constitute 75% of its total wheel sales. Any fluctuation in demand from them will adversely affect the company.

The company faces increased competition in terms of price, technology, product quality, delivery and overall customer service. In addition, the automotive component supply industry is highly competitive in nature. Superior faces competition from the well established companies as well as from the newly formed companies in low-cost foreign markets of China.

Other Stocks to Consider

Oshkosh Corporation (OSK - Snapshot Report), a Zacks Rank #1 (Strong Buy) stock, is performing well in the industry where Superior Industries operates.

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