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TRW Beats but Profits Fall - Analyst Blog

Posted
2/19/2013 12:40:00 PM
By: Zacks.com
Referenced Stocks:CVGI;OSK;STRT;TRW

TRW Automotive Holdings Corp. ( 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.

Excluding special items, operating income in the quarter dipped marginally by 3.9% to $295 million from $307 million in the prior year as higher sales and lower legal expenses were more than offset by planned increases in costs to support future growth and the adverse impact of currency movements.        

Earnings before interest, taxes, depreciation and amortization before special items (adjusted EBITDA) declined slightly by 2.2% to $404 million in the quarter compared with $413 million in the prior year quarter.

Annual Results

For full year 2012, TRW recorded a 17.3% fall in profits to $6.14 per share from $7.42 in 2011 (all excluding special items) while adjusted net income ebbed 18.8% to $788 million from $971 million a year ago. EPS in the year exceeded the Zacks Consensus Estimate of $5.93.

Revenues edged up 1.2% to $16.4 billion, driven by strong demand for the company's active and passive safety products, improved vehicle production volumes in North America and higher module sales globally, partially offset by lower vehicle production volumes in Europe and the negative impact of currency movements.        

Excluding special items, operating income dropped 3.6% to $1.2 billion from $1.3 billion in the prior year, as higher level of sales was more than offset by planned increases in costs to support future growth and the negative impact from higher raw material prices and currency movements.

Financial Position

TRW had $1.5 billion of debt and $1.2 billion of cash and cash equivalents as of Dec 31, 2012, resulting in net debt (debt less cash and cash equivalents) of $239 million. Consequently, debt to capitalization ratio declined to 29.0% as of Dec 31, 2012 from 34.3% as of Dec 31, 2011.

For full year 2012, net cash flow from operations was $956 million, a 14.6% decline from $1.1 billion in the prior year. Capital expenditures rose to $623 million in the year from $571 million in 2011. Consequently, free cash flow decreased to $333 million from $549 million in 2011 due to higher capital expenditures and increased payments pertaining to benefit plans and higher cash taxes.

2013 Outlook

TRW anticipates sales in the range of $16.4 billion−$16.7 billion for full year 2013, including $4.1 billion for the first quarter of the year. The expectations were based on the assumptions for industry production volumes of 15.8 million units in North America and 18.3 million units in Europe. The company continues to expect China and the rest of world regions to be the growth drivers in the year.

Our Take

TRW Automotive is a leading manufacturer of advanced technology products and services for the automotive markets. After the earnings announcement, the company's shares grew 0.8% to $60.32, the highest closing price since Feb 15, 2011. Currently, the company retains a Zacks #3 Rank on its stock, which translates into a Hold rating for the short term (1 to 3 months).

Few stocks that are performing well in the industry where TRW operates include Oshkosh Corporation ( OSK ) and Commercial Vehicle Group Inc. ( CVGI ), and STRATTEC SECURITY CORPORATION ( STRT ). They carry a Zacks Rank #1 (Strong Buy).



COMML VEHICLE (CVGI): Free Stock Analysis Report

OSHKOSH CORP (OSK): Free Stock Analysis Report

STRATTEC SEC CP (STRT): Free Stock Analysis Report

TRW AUTOMTV HLD (TRW): Free Stock Analysis Report

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