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TRW Beats on Earnings, Raises Rev Guidance

Zacks Equity Research

TRW Automotive Holdings Corp. (TRW) reported a 19.9% increase in its first-quarter 2014 earnings to $1.81 per share from $1.51 (all excluding special items) a year ago. Earnings per share exceeded the Zacks Consensus Estimate of $1.65. Net earnings (excluding special items) went up 13.8% to $215 million from $189 million in the first quarter of 2013.

Including special items, TRW reported net income of $199 million or $1.68 per share in the first quarter of 2014 compared with $162 million or $1.29 per share a year ago.

Revenues in the quarter grew 5% to $4.4 billion driven by strong demand for TRW’s innovative technologies, increased vehicle production volumes and a positive impact of currency translation, partly offset by the negative impact of exiting some businesses in the North American brake component and assembly operations. Revenues beat the Zacks Consensus Estimate of $4.31 billion.

Adjusted operating income rose 13.1% to $328 million (7.4% of sales) from $290 million (6.9% of sales) in the year-ago quarter. Including all special items, operating income increased to $308 million from $253 million a year ago.

Earnings before interest, taxes, depreciation and amortization and special items (Adjusted EBITDA) came in at $437 million in the quarter versus $396 million in the first quarter of 2013.       

Capital Deployment

During the reported quarter, TRW repurchased 3.9 million shares of its common stock for $400 million. The company also paid off bond debt with a face value of $469 million.

Financial Details

TRW had cash and cash equivalents of $811 million as of Mar 31, 2014, compared with $1.73 billion as of Dec 31, 2013. Total debt decreased to $1.89 billion as of Mar 31, 2014 from $2.11 billion as of Dec 31, 2013.

In the first quarter of 2014, net cash used in operating activities increased to $183 million from $178 million in the year-ago period. Capital expenditure inched up to $105 million in the period from $104 million in the comparable 2013-period. Consequently, free cash flow was a negative $288 million, higher than $282 million in the comparable period in 2013. 


For full-year 2014, TRW anticipates industry production of 16.8 million units in North America and 19.6 million units in Europe. Vehicle production in China is expected to increase.

Revenues for the year are expected in the range of $17.4–$17.7 billion, up from the previous guidance range of $17.3–$17.6 billion. In the second quarter of 2014, TRW is expected to report total sales of $4.5 billion. Revenue expectations are based on higher vehicle production volumes and the impact of foreign currency translations.

TRW is a leading manufacturer of advanced technology products and services for the automotive markets. Headquartered in Michigan, the company operates in 24 countries through its subsidiaries. These operations primarily involve designing, manufacture and sale of active and passive safety-related products. The company currently retains a Zacks Rank #3 (Hold).

Some stocks worth considering in the sector are Gentherm Incorporated (THRM), Magna International Inc. (MGA) and Superior Industries International, Inc. (SUP), all of which carry a Zacks Rank #1 (Strong Buy).

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