Zacks bull of the day: Visteon

This automotive supplier is transforming into a global enterprise.

By Jul 26, 2013 5:08PM

Image: Car interior © Westend61, Getty ImagesBy Neena Mishra


Thanks to its outstanding quarterly results, earnings estimates for Visteon Corporation (VC) have been on the uptrend -- and the company has maintained its Zacks rank #1 (Strong Buy) since March this year.

About the company

Visteon is a leading global automotive supplier of climate, electronics and interiors products for vehicle manufacturers. It serves original equipment vehicle manufacturers with its technical, manufacturing, sales and service facilities located in 29 countries. 

The company has been transforming from a U.S.-centric company, with only one major customer, to a predominantly Asia-based, multi-customer global enterprise.

Excellent first quarter results

The company reported its first quarter results on May 9. Adjusted earnings came in at $2.02 per share, significantly ahead of the Zacks consensus estimate of $1.15 per share.

Results benefited from increased vehicle production and new business in Asia and North America, partially offset by lower production volumes in Europe.

Hyundai (HYMLF) and Kia (KIMTF) accounted for approximately 33% of the sales, while Ford (F) accounted for another 28%. On a regional basis, Asia accounted for 46% of total sales, while Europe and Americas represented 30% and 24% respectively.

Visteon updated its full-year guidance for adjusted earnings, to a range of $4.04 to $5.52 per share.  The company has repurchased 2.2 million shares ($125 million) year-to-date, representing 4% of its outstanding shares.

Improved industry outlook

Per Zacks Auto Industry Outlook, while a strong pent-up demand due to aging vehicles on the U.S. roads along with falling unemployment rate have been the key factors in driving the auto sales in the U.S., Asia promises high growth for the industry.

Asian countries, especially China and India, are expected to account for 40% of growth in the auto industry over the next five to seven years, due to their rapidly growing economies. With its strong presence in Asia, VC will definitely benefit from the surging demand for automobiles in that region.

Estimates revisions

As a result of strong results and updated guidance, analysts have increased their earnings estimates for VC. Zacks consensus estimate for the current quarter now stands at $1.05 per share up from $0.97 per share, 30 days ago. The estimate for the current year is also up to $4.80 per share from $4.74 per share earlier.  The company has delivered positive earnings surprise in three out of last four quarters, with an average surprise of 22%. Visteon will announce its second quarter results on August 8, 2013.

The bottom line

VC is a Zacks Rank #1 (Strong Buy) stock. It also has a Zacks recommendation of "Outperform".  Further Zacks Industry Rank of 60 out of 265 also indicates chance of out-performance in the near- to mid- term.


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