Visteon Corp.'s (VC) near-term prospects have been dampened by constant production cuts at Ford (F), higher costs and uncertainty about its restructuring efforts. An apparent rise in non-Ford revenue was not enough to drive the stock.
The current cost structure combined with spiraling raw material costs is likely to challenge VC's operating performance in the upcoming quarters. Commodity pricing pressures would continue to challenge many suppliers like VC. The highly-leveraged balance sheet still needs to be tackled. Considering these factors, we downgrade the shares from Hold to Sell and set a target price of $2.50.
During the second quarter of 2008, the company has reported loss per share of $0.32 from continuing operations, compared to the loss per share of $0.46 in the same quarter of the previous year. Total revenues were $2.9 billion, a decrease of $69 million from the same period a year ago, including $17 million of lower services revenue.
During the first quarter of 2008, the company sold its North America-based aftermarket and remanufacturing operations including facilities located in Sparta, Tennessee and Reynosa, Mexico. This has resulted in a loss of $40 million in the quarter. We also note the company's admission of the delay in its restructuring moves. Although the company has taken steps to reduce its labor costs by rationalizing high-wage hourly employees and flow backs to Ford, its benefits are muted in the short term.
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