On Feb 19, we maintained our Neutral recommendation on
TRW Automotive Holdings Corp.
), despite its lower earnings in the fourth quarter of fiscal
2012, based on its innovative technologies, which will boost the
results of the company in near term.
TRW posted a 15.8% fall in profits to $1.55 per share in the
fourth quarter of 2012 from $1.84 in the same quarter of 2011
(all excluding special items). However, the quarterly EPS
surpassed the Zacks Consensus Estimate by 20 cents. Adjusted net
income dipped 16.4% to $199 million from $238 million in the
fourth quarter of 2011.
Revenues in the quarter inched up 1.2% to $4.0 billion, driven by
higher demand for the company's innovative technology products,
increased vehicle production volumes in North America and China
and a rise in module sales globally, partially offset by
significantly lower vehicle production in Europe and the negative
impact of currency movements.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for fiscal 2013 dipped 0.9% to $6.33 per
share. Meanwhile, the Zacks Consensus Estimate for fiscal 2014
remained unchanged at $7.55 per share. The company now has a
Zacks Rank #3 (Hold).
TRW occupies a leading position in the automotive systems market.
It commands about one-fifth of the world market for airbags,
seatbelts and related electronics. In addition, the company's
continuous focus on improving its vast product portfolio will
have favorable impacts on the results. This initiative will
enable the company to differentiate from its peers.
Enforcement of the new regulation by the U.S. National Highway
Traffic Safety Administration will boost the sales of the company
significantly. This regulation, which requires all passenger cars
to install side-impact safety devices from 2013 onwards, will
benefit the company's Occupancy Safety Systems division.
However, economic weakness in the European and North American
markets will mar the company's results. In addition, the company
is under pressure due to the high customer concentration. The
premium customer of the company commands nearly 50% of the
company's sales. Loss of any one of these customers or major
production cutbacks by any of them could have a significant
impact on the company's operations.
Other Stocks to Look For
Few stocks that are performing well in the industry where TRW
Strattec Security Corporation
Magna International Inc.
). Oshkosh and Strattec Security are Zacks Rank #1 (Strong Buy)
stocks while Magna International carries a Zacks Rank #2
MAGNA INTL CL A (MGA): Free Stock Analysis
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STRATTEC SEC CP (STRT): Free Stock Analysis
TRW AUTOMTV HLD (TRW): Free Stock Analysis
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