In the current landscape of the automotive industry, US auto suppliers are anticipated to fall short of Wall Street's revenue projections for the third quarter. A few companies, however, are expected to slightly exceed expectations in terms of profit margins, according to a recent analysis from Deutsche Bank.
Aptiv, recognized as a key player in the auto supply sector, is highlighted as being at risk of missing its revenue targets. Nevertheless, the company's earnings for the quarter may outperform expectations due to strong operational performance flow-through. Other firms like Autoliv, Lear, and Dana are also predicted to underperform against top-line projections for the third quarter, as noted by Deutsche Bank analyst Edison Yu.
Lear, a company specializing in automotive seating and electrical systems, announced in July that it now expects its 2024 net sales to be between $23.23 billion and $23.67 billion, a decrease from its prior expectations of $24 billion to $24.6 billion. This downward revision aligns with Autoliv’s CEO Mikael Bratt’s comments regarding a 3.4% downgrade in North America’s light vehicle production outlook due to an urgent need for inventory correction.
In light of Lear's revisions on both top-line and margin expectations and Autoliv’s noted softness owing to North American volumes and recovery timelines, a broad contraction in suppliers' top-line results is expected. It's important to highlight that some suppliers might still meet margin expectations through strategic cost management.
Furthermore, European original equipment manufacturers have provided profit warnings for the latter half of the year, citing various economic headwinds including issues stemming from China, inventory accumulation in North America, and flooding events impacting Eastern Europe. Deutsche Bank elaborated that the inventory challenges predominant in North America predominantly affect Stellantis.
Recently, Stellantis adjusted its projections for full-year adjusted operating income margin and free cash flow due to worsening global market trends. Some suppliers such as Adient, American Axle & Manufacturing, BorgWarner, and Visteon are suggested to potentially meet third-quarter forecasts, despite the prevailing uncertainty within the industry.
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