Superior Industries: Earnings Scorecard

Nov.15.10 | About: Superior Industries (SUP)

Superior Industries International Inc. (SUP) reported its third quarter earnings for 2010 on November 5, 2010, that was slightly ahead of the Zacks Consensus Estimate by 2 cents per share. The market reacted positively, with share prices rising in the subsequent days.

Analysts were optimistic given the company’s impressive results and better outlook as most of them covering the stock revised the estimates upward. Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short-term and the long-term outlook for the stock.

Third Quarter Report
Superior Industries’ profit surpassed the Zacks Consensus Estimate due to an impressive rise in shipments. Consolidated sales surged 65% to $183.7 million from $111.4 million a year ago.

Shipments rose 45%, contributing $49.5 million to the increase in sales, while the higher pass-through pricing of aluminum contributed $18.7 million to the same. Average selling prices hiked 14.4% from the prior-year period.

Unit shipments to Ford Motor Co. (F) rose 31%, General Motors increased 36%, Chrysler shot up 65% and to international customers jumped 75%.

(See Superior Industries Earnings Blog: Superior Industries Beats)

Earnings Estimate Revisions – Overview
Estimates have improved since the earnings release, implying analysts’ optimism on the stock. The share price movement was favorable as well, suggesting Superior Industries’ stock worth being held back. Lets move into the earnings estimate details.

Agreement of Estimate Revisions
The table below shows a strong agreement among the analysts regarding the outlook of the company’s earnings. Out of 4 analysts covering the stock, 3 analysts have revised upward the estimate for 2010 and only one analyst have revised it downward.

Looking into 2011, the trend is even stronger. As many as 3 analysts have revised the estimate upward while none moved in a downward direction. This impressive trend in estimate revisions promises a consistent stream of earnings.

Agreement - Estimate Revisions
Current Qtr
Next Qtr
Current Year
Next Year
Up Last 7 Days 1 0 3 3
Up Last 30 Days 1 0 3 3
Down Last 7 Days 1 0 1 0
Down Last 30 Days 2 0 1 0
Click to enlarge

Magnitude of Estimate Revisions
Earnings estimates for 2010 are raised by 13 cents, from $1.08 to $1.21 since the earnings announcement. Analysts are even more confident about 2011. They have raised the estimates by 23 cents from $1.37 to $1.60 for the year. This looks promising again as analysts continue to value the stock at an increasing premium.

Magnitude - Consensus Estimate Trend
Current Quarter
Next Quarter
Current Year
Next Year
Current 0.34 0.39 1.21 1.60
7 Days Ago 0.35 0.00 1.08 1.37
30 Days Ago 0.33 0.00 1.05 1.37
60 Days Ago 0.33 0.00 1.05 1.37
90 Days Ago 0.21 0.00 0.60 1.08
Click to enlarge

Superior in Neutral Lane
Superior Industries has a product portfolio geared to suit current market trends. The company is expected to benefit from huge growth prospects in the Asian markets. Annual growth is expected to be 11% in India and 9% in China during 2010. The Korean automotive market is also expected to expand significantly.

Further, the company has no bank or other interest bearing debt on its balance sheet. The absence of any long-term debt has allowed for full utilization of cash by investing in potential opportunities

However, Superior Industries has significant exposure to the Big Three – Ford, General Motors and Chrysler. The Big Three represented 80% of its total wheel sales during the first nine months of 2010.

Besides, the company gets exposed to foreign currency transaction losses due to its Mexican operations. In the first three quarters of 2010, the value of peso increased by 3% with respect to the U.S. dollar. This led to a foreign currency transaction loss of $1.6 million during the period compared to a loss of $1 million in 2009.

These have led us to reiterate our Neutral recommendation on the stock for the long-term.