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Bull of the Day

Visteon Corp. (VC - Snapshot Report) delivered a big Q4 earnings and sales beat on February 28, and management provided bullish guidance for 2013.

This prompted analysts to revise their estimates significantly higher for both this year and next, sending the stock to a Zacks Rank #1 (Strong Buy). Despite the strong earnings momentum, the valuation picture still looks very reasonable with shares trading at just 1.4x book value.

Visteon is a global automotive supplier that specializes in climate, electronics and interiors systems, modules and components for the major automotive manufacturers around the globe. Over 80% of its sales come from outside of North America.

Strong Q4 Beat

Visteon delivered a big fourth quarter beat on February 28. Adjusted earnings per share came in at $1.17, beating the Zacks Consensus Estimate by 20 cents.

Sales rose 5% to $1.823 billion, well ahead of the consensus of $1.782 billion. This increase was primarily driven by higher sales in the 'Climate' segment, which saw higher production volumes in Asia and North America.

The gross profit margin expanded 253 basis points to 10.9%. Meanwhile, selling, general and administrative expenses held steady at 5.6% of total sales. These factors led to a solid 27% increase in earnings before interest, taxes, depreciation and amortization (EBITDA).

Estimates Rising

Following strong Q4 results, management provided encouraging sales and EBITDA guidance for 2013. This prompted analysts to revise their estimates higher for both 2013 and 2014, sending the stock to a Zacks Rank #1 (Strong Buy).

The 2013 Zacks Consensus Estimate is now $3.98, representing 37% growth over 2012. The 2014 consensus is currently 38% higher at $5.50.

The two biggest factors of the Zacks Rank are the 'Agreement' and 'Magnitude' of the analysts' estimates. As you can see in the chart below, both of these factors are moving in the right direction:

Reasonable Valuation

The valuation picture looks reasonable for Visteon with shares trading at 13x forward earnings, in-line with its historical median.

Its price to book ratio is just 1.4, which is also in-line with its historical multiple.

The Bottom Line

With strong earnings momentum and reasonable valuation, Visteon offers investors attractive upside potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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