On Jan 24, we maintained our Outperform recommendation on TRW Automotive Holdings Corp. (TRW) based on strong third-quarter 2013 results and an improved guidance. Moreover, the company has a solid financial position and its investment in innovative technologies facilitate contract wins.
Why the Reiteration?
On Oct 29, 2013, TRW reported a 22.6% year-over-year increase in third-quarter earnings to $1.52 per share from $1.24 (all excluding special items) a year ago. Earnings also exceeded the Zacks Consensus Estimate of $1.48.
Revenues in the quarter grew 6.2% year over year to $4.21 billion driven by strong demand for TRW’s innovative technologies, increased vehicle production volumes in North America and China, and positive currency translation impacts. Revenues beat the Zacks Consensus Estimate of $4.16 billion.
Following the release of third-quarter results, the Zacks Consensus Estimate for TRW’s 2013 earnings rose 0.2% to $6.67 per share. However, the Zacks Consensus Estimate for 2014 decreased 3.6% to $7.40 per share.
TRW is globally recognized as one of the largest and most diversified suppliers of automotive systems, modules and components to OEMs and the related aftermarket. In addition, the company is constantly striving to expand its vast product portfolio, which is likely to boost top- and bottom-line growth.
For full-year 2013, TRW forecasts production of 16.2 million units in North America and 18.9 million units in Europe. Revenues for the year are expected to stand at $17.1 billion. The expectation is based on production estimates, the company’s performance in the first nine months of 2013 and the projected foreign exchange rates.
In addition, TRW’s innovative technologies enable it to win contracts. In Oct 2013, TRW signed a deal to supply its Electrically Powered Hydraulic Steering (EPHS) technology to Ferrari's LaFerrari. The company also introduced a number of safety features in the new Qoros 3 Sedan.
Other Stocks That Warrant a Look
Better-ranked stocks in the industry in which TRW operates include Gentex Corp. (GNTX), Magna International Inc. (MGA) and Meritor, Inc. (MTOR). All these stocks carry a Zacks Rank #2 (Buy).
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