Shares of TRW Automotive Holdings Corp. (TRW) gained 4.6% on Feb 14, 2014 after the company reported an 18.7% increase in its fourth-quarter 2013 earnings to $1.84 per share from $1.55 (all excluding special items) a year ago. Earnings per share exceeded the Zacks Consensus Estimate of $1.63. Net earnings (excluding special items) went up 11.6% to $222 million from $199 million in the fourth quarter of 2012.
Including special items, TRW reported net income of $363 million or $3 per share in the fourth quarter of 2013 compared with $419 million or $3.26 per share a year ago.
Revenues in the quarter grew 11.5% to $4.5 billion driven by strong demand for TRW’s innovative technologies, increased vehicle production volumes together with positive currency translation impacts. Revenues beat the Zacks Consensus Estimate of $4.2 billion.
Operating income rose 13.9% to $336 million (7.5% of sales) from $295 million (7.3% of sales) in the year-ago quarter. Including all special items, operating income increased to $300 million from $155 million a year ago.
Earnings before interest, taxes, depreciation and amortization and special items (Adjusted EBITDA) came in at $447 million in the quarter versus $404 million in the fourth quarter of 2012.
Fiscal 2013 Performance
TRW’s earnings increased 12.2% to $6.89 per share for full-year 2013 from $6.14 in 2012. Earnings per share exceeded the Zacks Consensus Estimate of $6.68.
Including special items, TRW reported net income of $970 million or $7.85 per share in 2013 compared with $1 billion or $7.83 per share in 2012.
Revenues for full-year 2013 rose 6% to $17.4 billion from $16.4 billion in 2012. Revenues beat the Zacks Consensus Estimate of $17.2 billion. The rise reflects higher demand for TRW's active and passive safety products and higher vehicle production volumes in North America and China.
Capital Deployment
During the fourth quarter of 2013, TRW repurchased 1 million shares of its common stock for $60 million. The company also used $214 million to pay off senior notes with face value of $205 million. TRW also completed a $400 million notes offering in anticipation of bond debt due in Mar 2014.
During 2013, TRW repurchased 7.5 million shares of its common stock for $520 million. The company also used $309 million to pay off senior notes with face value of $296 million. Further, TRW converted $26 million of exchangeable notes into shares.
Financial Details
TRW had cash and cash equivalents of $1.7 billion as of Dec 31, 2013, compared with $1.2 billion as of Dec 31, 2012. Total debt increased to $2.1 billion as of Dec 31, 2013 from $1.5 billion as of Dec 31, 2012.
In 2013, net cash flow from operating activities increased to $1.1 billion from $956 million in 2012. Capital expenditure grew to $735 million in the period from $623 million in the 2012-period. Consequently, free cash flow rose to $391 million from $333 million in 2012.
Outlook
For full-year 2014, TRW anticipates industry production of 16.8 million units in North America and 19.5 million units in Europe, representing an increase of 4% and 1%, respectively, from the 2013 level. Vehicle production in China and rest of the world are also expected to increase.
Revenues for the year are expected in the range of $17.3–$17.6 billion. In the first quarter of 2014, TRW is expected to report total sales of $4.3 billion. The revenue expectation is based on higher vehicle production volumes, partially offset by exit of certain businesses in North American brake component and assembly operations.
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 the design, 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 auto industry are Tesla Motors, Inc. (TSLA), Volkswagen AG (VLKAY) and Dongfeng Motor Group Company Limited (DNFGY). Tesla carries a Zacks Rank #1 (Strong Buy), while Volkswagen and Dongfeng carry a Zacks Rank #2 (Buy).
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