TRW Automotive Holdings Corp. (TRW) reported a 14.9% increase in its second-quarter 2014 earnings to $2.32 per share from $2.02 (all excluding special items) a year ago. Also, earnings per share exceeded the Zacks Consensus Estimate by 20 cents. Net earnings (excluding special items) went up 7.1% to $270 million from $252 million in the second quarter of 2013.

Including special items, TRW reported net income of $265 million or $2.27 per share in the second quarter of 2014 compared with $248 million or $1.99 per share a year ago.

Trw Automotive Holdings Corp - Earnings Surprise | FindTheBest

Revenues in the quarter grew 1.8% to $4.59 billion driven by increasing demand for the company's active and passive safety technologies, rising vehicle production volumes in major markets, and the positive impact of currency translation. However, this increase was partially 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 $4.56 billion.

Adjusted operating income rose 0.8% to $389 million (8.5% of sales) from $386 million (8.6% of sales) in the year-ago quarter. The year-over-year increase was driven by higher sales, partially offset by increased costs related to future growth plans. Including all special items, operating income decreased to $383 million from $385 million a year ago.

Earnings before interest, taxes, depreciation and amortization and special items (adjusted EBITDA) came in at $500 million in the quarter versus $492 million in the second quarter of 2013.

Capital Deployment

During the first half of 2014, TRW repurchased 3.9 million shares for $400 million through an accelerated share repurchase agreement, which is expected to be completed by the end of the third quarter of 2014.

Financial Details

TRW had cash and cash equivalents of $931 million as of Jun 27, 2014, compared with $1.7 billion as of Dec 31, 2013. Total debt decreased to $1.9 billion as of Jun 27, 2014 from $2.1 billion as of Dec 31, 2013.

In the first half of 2014, net cash flow from operating activities decreased to $74 million from $93 million in the year-ago period. Capital expenditure inched down to $236 million in the period from $271 million in the comparable 2013-period. Consequently, free cash flow was a negative $162 million, compared with $178 million in the comparable period in 2013.

Outlook

For full-year 2014, TRW anticipates industry production of 17 million units in North America and 19.9 million units in Europe. Though vehicle production in China is expected to increase, Brazil remains a challenge for the company owing to the country’s unfavorable economic conditions.

Revenues for the year are expected in the range of $17.5–$17.7 billion, up from the previous guidance range of $17.4–$17.7 billion. In the third quarter of 2014, TRW is expected to report total sales of $4.2 billion. Revenue expectations are based on higher vehicle production volumes and the positive 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 design, manufacture and sale of active and passive safety-related products. The company currently holds a Zacks Rank #2 (Buy).

Some other well-performing stocks worth considering in the sector are Visteon Corporation (VC), Magna International Inc. (MGA) and American Axle & Manufacturing Holdings Inc. (AXL). Visteon and Magna International carry a Zacks Rank #1 (Strong Buy), while American Axle is a Zacks Rank #2 stock.

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