TRW Beats but Earnings Fall

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TRW Automotive Holdings Corp. (TRW) posted earnings of $1.51 per share in the first quarter of 2013, topping the Zacks Consensus Estimate of $1.46.

However, earnings fell 6.8% from $1.62 per share in the first quarter of 2012 due to lower operating income on the back of a higher mix of lower margin business and planned increases in costs to support future growth. Net earnings dipped 10.4% to $189 million from $211 million a year ago. All of them excluded special items.      

Including special items, net earnings were $162 million or $1.29 per share in the quarter compared with $206 million or $1.59 per share in the prior-year quarter.       

Revenues in the quarter were almost flat at $4.2 billion as the impact of increasing demand for TRW’s innovative technologies and higher vehicle production volumes in China were offset by significantly lower vehicle production in Europe.

Adjusted operating profits dipped 12.9% to $290 million from $333 million in the prior year period. Earnings before interest, taxes, depreciation and amortization and special items decreased 9.8% to $396 million in the quarter from $439 million a year ago.

TRW had cash and cash equivalents of $1.35 billion as of Mar 29, 2013 compared with $1.2 billion as of Dec 31, 2012. Total debt increased to $1.9 billion as of Mar 29, 2013 compared with $1.5 billion as of Dec 31, 2012. As a result, debt-to-capitalization ratio went up to 33.9% from 29.0% as of Dec 31, 2012.

In the quarter, the company had a higher cash flow use of $178 million from operations compared with $102 million in the prior year quarter. The decline in cash flow was primarily attributable to lower earnings and higher accounts receivable.

Capital expenditures (including other intangible assets) increased to $104 million from $96 million in the first quarter of 2012 in order to support the company’s growth initiatives. Consequently, free cash flow deteriorated to the use of $282 million compared with $198 million in the comparable period last year.

For full year 2013, TRW anticipates production of 16.0 million units in North America and 18.4 million units in Europe. The company anticipates market conditions in Europe to remain challenging in the near-term, with a modest recovery in the second half of the year. It continues to expect expansion in vehicle production volumes in China and rest of world regions.  

Based on these production levels, first quarter results and expectations for foreign currency exchange rates, full year 2013 revenues are expected between $16.6 billion and $16.9 billion for the year, including $4.3 billion for the second quarter of the year.

TRW Automotive is a leading manufacturer of advanced technology products and services for the automotive markets. Headquartered in Michigan, U.S., the company operates in 27 countries through its subsidiaries.

These operations primarily involve the design, manufacture and sale of active and passive safety related products. Currently, the company retains a Zacks #3 Rank on its stock, which translates to a Hold rating for the short-term (1 to 3 months).

The company’s major customers include Ford Motor Co. (F), General Motors Company (GM) and Volkswagen AG (VLKAY). They account for nearly 50% of its sales.

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