(TRW) TRW Automotive Holdings Beats on Higher Sales

TRW Automotive Holdings Corp. (TRW) reported net earnings of $293 million or $2.21 per share in the second quarter of 2011 compared with $227 million or $1.78 per share in the year-ago quarter.

The reported quarter included a gain of $19 million associated with the resolution of a commercial matter, a loss of $10 million related to the retirement of debt and tax benefits of $20 million, while the prior-year quarter included restructuring and asset impairment charges of $3 million, debt retirement charges of $1 million and tax benefits of $10 million.

Excluding these special items, TRW realized adjusted earnings of $264 million or $1.99 per share, comprehensively beating the Zacks Consensus Estimate of $1.72 per share. The adjusted earnings increased 19.5% from the year-ago quarter adjusted earnings of $221 million or $1.73 per share, driven by the company’s strong market position and accretive expansion strategies.

Revenues in the quarter escalated 15.6% year over year to $4.23 billion. The increase in sales was attributable to higher vehicle production volumes, particularly in the domestic vehicle manufacturers, rising demand for TRW’s active and passive safety products and favorable currency translation effects.

The company’s second quarter 2011 operating income was $368 million compared with  $322 million in the prior-year period. Reported operating income included a gain of $19 million related to the favorable resolution of a commercial matter and restructuring charges of $3 million in the last year.

Excluding these items, operating income increased to $349 million in the quarter from $325 million a year ago. The increase was driven by a positive impact from higher sales, partially offset by higher raw material prices and increased costs to support future expansion.

Financials

TRW had cash and cash equivalents of $1.15 billion as of July 01, 2011, up from $1.08 billion as of December 31, 2010. Long-term debt plunged to $1.65 billion at the end of the second quarter in 2011 from $1.80 billion at the end of the fourth quarter in 2010. During the first half of 2011, TRW repurchased approximately $175 million of debt.

In the first six months of the year, the company’s net cash flow from operating activities deteriorated to $352 million from $423 million in the prior-year period. Capital expenditure in the first six months increased to $167 million from $107 million in the first six months of 2010. As a result, free cash flow dropped to $185 million from $316 million in the first half of 2010.

Outlook

TRW anticipates full-year production of 13.0 million units in North America and 20.0 million units in Europe. Based on the production level guidance and the company’s expectation for foreign currency exchange rates, sales are now projected between $16.2 billion and $16.4 billion for 2011, including sales of $3.9 billion for the third quarter of 2011.

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.

The company retains a Zacks #3 Rank (Hold) on its stock for the short term (1 to 3 months) and we have reiterated a “Neutral” recommendation on the shares for the long term (more than 6 months).

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