UPDATE 3-Delphi sees Europe stabilizing, but outlook disappoints

Tue Nov 5, 2013 12:50pm EST

By Ben Klayman

DETROIT Nov 5 (Reuters) - Delphi Automotive Plc posted a stronger-than-expected quarterly profit on Tuesday on strong demand in North America and Asia, and said the European auto market was stabilizing, but its new full-year forecast disappointed, sending its shares down 4.8 percent.

The auto parts maker narrowed the range of its full-year profit forecast for this year, putting its outlook below Wall Street's expectations.

"The in-line quarter and trimmed guidance comes as sentiment on Europe is starting to improve," Morgan Stanley analyst Ravi Shanker said in a research note. "It appears that suppliers that are most dependent on Europe are not rebounding as quickly as expected."

Net income in the third quarter rose slightly to $271 million, or 87 cents a share, from $269 million, or 84 cents a share, in the year-earlier period.

Excluding one-time items related to restructuring and acquisitions, Delphi earned 97 cents a share, 3 cents better than analysts expected in a Thomson Reuters I/B/E/S poll.

Revenue rose almost 10 percent from last year to $4.02 billion, compared with the $4.03 billion analysts had expected. Revenue grew 10 percent and 9 percent in Asia and North America, respectively, and fell 5 percent in Europe and 2 percent in South America.

"Although we remain cautious, the European market does seem to be stabilizing," Chief Executive Rodney O'Neal said on a conference call.

The company reaffirmed that it expects global vehicle production this year to rise 2 percent to 86.5 million vehicles. For 2014, O'Neal said Delphi expects global industry output to rise another 2 percent to 3 percent, including a rate of flat to up 2 percent in Europe.

Chief Financial Officer Kevin Clark said the passenger car market in Europe was stabilizing, but the commercial vehicle segment was more challenging than previously expected. Nevertheless, he said the company expects sales in the region to rise year-over-year in the fourth quarter.

O'Neal said Delphi would roughly double its revenue in China over the next five years. Sales in China in the third quarter rose 12 percent.

He also said new business bookings this year were on track to match last year's $26.3 billion. Through September, it had booked $18.6 billion this year, and in October it won another $2.5 billion.

Delphi also narrowed its forecast for full-year adjusted profit, saying it now expects a range of $4.25 to $4.35 a share. It previously had forecast a range of $4.22 to $4.45 a share.

It now expects full-year revenue in the range of $16.3 billion to $16.4 billion. Its previous forecast had a top range of $16.5 billion.

Analysts were expecting a profit of $4.40 on revenue of $16.46 billion.

Citi analyst Itay Michaeli said the high end of the company's forecast implied fourth-quarter revenue of $4.12 billion and earnings of $1.07 a share. He had expected $4.14 billion and $1.13 a share.

Shares of Delphi fell 4.8 percent, or $2.77, to $55.23 in afternoon trading on the New York Stock Exchange.

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