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Autoliv Inc. (ALV) stock fell about 5% in premarket trading Friday after the automotive safety supplier reported weaker-than-expected third-quarter 2026 earnings and revenue, as rising costs and supply chain challenges weighed on profitability.
The company reported adjusted earnings of $2.19 per share, missing analysts' consensus estimate of $2.31.
Revenue declined 0.5% year over year to $2.69 billion, missing Wall Street's estimate of $2.73 billion.
Organic sales fell 1.1%, outperforming the 1.9% decline in global light-vehicle production by 80 basis points.
Despite nearly 30% sales growth in India, Autoliv's profitability came under pressure as raw-material inflation dealt a roughly $42 million blow to quarterly earnings, contributing to narrower margins and a reduced full-year margin outlook.
Gross profit dropped 5% to $496 million, while gross margin narrowed to 18.4%. The decline reflected the absence of $13 million in supplier settlement compensation received a year earlier, lower sales and higher logistics costs.
Adjusted operating income fell 3.4% to $262 million. The adjusted operating margin narrowed to 9.7% from 10% a year earlier.
GAAP diluted earnings per share declined 6.8% to $2.13, reflecting higher taxes and lower operating income. Fewer outstanding shares and lower financial and nonoperating expenses partly offset the decline.
Tariffs reduced profitability by approximately $6 million, even after compensation from customers.
Autoliv ended the quarter with $197 million in cash, $1.93 billion in gross debt and $1.76 billion in net debt. Its leverage ratio remained unchanged at 1.3 times.
The company also repurchased 1.23 million shares for approximately $150 million and paid $63 million in dividends.
Sales in the Airbags, Steering Wheels and Other segment rose 0.9% to $1.85 billion, including 0.2% organic growth.
Sales in the Seatbelt Products and Other segment declined 3.5% to $845 million, including a 3.9% organic decline.
Organic sales climbed 8.8% in Asia excluding China, driven primarily by India and Japan.
However, organic sales fell 5.8% in China and 2.9% in both the Americas and Europe, the Middle East and Africa.
Despite the overall decline, Autoliv outperformed global light-vehicle production. The company reported particularly strong performance in India, Japan and among Chinese automakers.
Autoliv also opened its second research and development center in China during the quarter to strengthen partnerships with Chinese automakers.
Autoliv maintained its full-year outlook for roughly flat organic sales and operating cash flow of about $1.2 billion.
However, the company narrowed its adjusted operating margin forecast to approximately 10.5%, the low end of its previous range of 10.5% to 11%, citing additional cost pressures.
Capital expenditures are expected to account for roughly 4% of net sales.
The outlook assumes a 2% decline in global vehicle production, a 2.5% positive currency impact and approximately $120 million in gross raw-material cost headwinds.
Management cited increased pressure from raw-material costs, logistics expenses, recent flooding in Thailand and weaker customer order accuracy since the first quarter.
Autoliv expects customer ordering patterns to improve slightly. However, geopolitical uncertainty, changing tariffs and trade restrictions could create further volatility and inflationary pressure.
CEO Mikael Bratt said the company continued to address rising costs through improved labor efficiency, material savings from value engineering and negotiations with customers and suppliers.
Despite the uncertain operating environment, Autoliv expects a strong fourth quarter, supported by more product launches and significant raw-material cost recoveries.
ALV Price Action: Autoliv shares were down 5.12% at $112.79 during premarket trading on Friday, according to market data.
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