Why Veoneer Inc (NYSE: VNE) stock made a disappointing start this year

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Veoneer Inc (NYSE: VNE) stock fell 9.93% on Jan 6th, 2019 (Source: Google finance) after the company expects current total order book value to be about $19 billion, disappointing the anticipation of more than $19 billion from the end of 2018. This is despite an average fall in the expectations for light vehicle production until 2025 of about 9%, compared to the expectations from one year ago. Similar to last year about 80% of the order book is for the Electronics business segment (Active Safety and Restraint Control Systems). However, the lifetime value of the new order intake for the full year 2019 is projected to be at approximately $2.5 billion, corresponding to an average annual new order intake value of around $550 million, of which around 70% is for Active Safety orders. The lower than expected figure is mainly on the back of delayed timing of orders.

Moreover, the company expects the core Active Safety and Restraint Control Systems sales to grow to about $2.5 billion by 2022, which is a compound annual growth rate (CAGR) of approximately 19%, an outperformance of the currently expected light vehicle production by more than 15%. Including its Brake Control Systems business, currently under strategic review, the sales are projected to be about $3.3 billion and an estimated CAGR of 20%. This is compared to last 12 months net sales as of September 30, 2019 of the core business of $1.604 billion and total net sales (including the Brake Control Systems business) of $1.982 billion. The company expects to return to organic sales growth in 2020.

Additionally, for the full year 2019 the company expects the organic sales to decline in the low double digits as compared to 2018 while currency translation effects on sales are now expected to fall by about 3%. The company continues to expect RD&E, net to be less than $600 million for the full year 2019 and expect further cost structure improvements from the market adjustment initiatives during the fourth quarter and into 2020. The cash flow before financing activities for the second half of 2019 is expected to remain at similar levels as compared to the first half of 2019, and the fourth quarter operating loss to improve sequentially from the third quarter. For the fourth quarter of 2019, sequentially from the third quarter of 2019 the sales are now anticipated to be slightly lower while the operating loss is expected to improve.

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