No-moat, positive-moat-trend rated Autoliv ALV reported first-quarter earnings per share before special items of $1.32, $0.09 ahead of the Street consensus of $1.23. Even so, owing to lackluster European new-car demand and Autoliv’s European customers’ inventory corrections, the $1.32 first-quarter EPS were down $0.24 from $1.56 a year ago. However, management favorably tweaked its full-year 2013 guidance, slightly raising its expectations for revenue growth of 2%-4% versus the previously indicated range of 1%-3% growth in revenue. Management maintained its operating margin guidance of around 9% despite the higher revenue guidance, due mainly to unfavorable currency effects.

Our investment thesis remains intact and we continue to expect increasing penetration of Autoliv’s electronics and safety equipment. In particularly, with 2014 and 2017 European New Car Assessment Program (NCAP) rules going into effect, certain active safety systems will be required to come as standard equipment to achieve four- and five-star government safety ratings. There was still no discussion of a resolution to the ongoing investigation by European antitrust authorities, which has been an overhang to the stock for more than a year. We remind investors that sensitivity of our fair value estimate to a settlement is somewhat limited, as $100 million changes our fair value estimate by only about $1.25. To shed some light on magnitude, the time value of money component in our DCF model would substantially offset a $1.25 hit to our $80 fair value estimate.