Stoneridge Inc.SRI

Morningstar Rating

Stock Research and Analysis

by David Manger

As an auto supplier, Stoneridge suffers from intense competition, cyclical demand, and rising raw-material costs. However, the company's lack of financial leverage compared to many of its competitors may allow it to attract business from customers seeking Read more

Bulls Say

PST, the firm's Brazilian joint venture, generated annual top-line growth of nearly 40% from 2005 through 2008 on average, while also increasing operating margins from approximately 10.5% to more than 19%.

Stoneridge's strong balance sheet compared to many industry peers could prove beneficial as OEMs look to transfer business to financially secure suppliers.

The company's $100 million credit facility does not contain any financial performance covenants, providing Stoneridge with wider flexibility than many competitors.

Stoneridge's electronics business should enjoy solid growth over the long term as consumers demand more-complex electronic features in vehicles. Read more

Bears Say

Similar to most auto parts suppliers, Stoneridge has a fixed cost structure that leads to wide swings in profitability when sales fluctuate. That said, we have concerns management was late in anticipating the magnitude of recent production declines, resulting in large operating losses.

Stoneridge relies on a small number of customers. In 2008, Navistar NAV accounted for 26% of total sales.

The automotive and truck supplier industries are highly competitive and suffer from cyclical demand swings. Read more

Strategy

The company continues to expand its manufacturing footprint to low-cost regions such as Mexico, Estonia, and China. In addition to providing cost savings, management believes these regions will be important Read more

Management

John Corey took the reigns as CEO in January 2006 from Gerald Pisani, whose tenure lasted less than two years. Corey is an industry veteran having previously served as CEO of Safety Components International, a low-cost supplier of airbags and components. Read more

Profile

Stoneridge designs and manufactures electrical and electronic components, modules, and systems for the automotive, agricultural, medium- and heavy-duty truck, and off-highway Read more

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