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TRW Automotive Holdings Corp. (TRW - Analyst Report) reported a 22.6% increase in its third-quarter earnings to $1.52 per share from $1.24 (all excluding special items) a year ago. Earnings per share exceeded the Zacks Consensus Estimate of $1.48. Net earnings (excluding special items) went up 19.1% to $187 million from $157 million in the third quarter of 2012.

Including special items, TRW reported net income of $197 million or $1.60 per share in the third quarter of 2013 compared with $163 million or $1.28 per share a year ago.

Revenues in the quarter grew 6.2% to $4.21 billion driven by strong demand for TRW’s innovative technologies and increased vehicle production volumes in North America and China together with positive currency translation impacts. Revenues beat the Zacks Consensus Estimate of $4.16 billion.

Operating income rose 10.3% to $289 million from $262 million in the 2012-quarter. Excluding restructuring charges of $5 million and $3 million in the 2013 and 2012 quarters, respectively, operating income increased to $294 million from $265 million a year ago, driven by increased sales, partially offset by higher costs related to growth strategies.

Earnings before interest, taxes, depreciation and amortization and special items (Adjusted EBITDA) were $403 million in the quarter versus $361 million in the third quarter of 2012.                          

Share Repurchases

Along with the earnings release, the company also announced that TRW’s board of directors has approved a $1 billion increase in share repurchase authorization. Thus, the total authorization under the share repurchase program has been increased to $2 billion. The company had approximately $1.47 billion worth of buyback authorization remaining under its share repurchase program, which represents about 16% of TRW's current market capitalization. The company expects to use the entire remaining authorization over the next three years.

During the first nine months of 2013, TRW repurchased 6.5 million shares of its common stock for $460 million. The company also used $96 million to pay off senior notes with face value of $91 million.

Financial Details

TRW had cash and cash equivalents of $1 billion as of Sep 27, 2013, compared with $1.2 billion as of Dec 31, 2012. Total debt increased to $1.9 billion as of Sep 27, 2013 compared with $1.5 billion as of Dec 31, 2012.

In the first nine months of the year, net cash flow from operating activities decreased 2% to $240 million from $245 million in the same period of 2012. Capital expenditure increased to $411 million in the period from $325 million in the 2012-period. Consequently, free cash flow use rose to $171 million from $80 million in the comparable period last year.  

Outlook

For full year 2013, TRW anticipates industry production of 16.2 million units in North America and 18.9 million units in Europe. Revenues for the year are expected to be $17.1 billion. The revenue expectation was based on the production estimates, the company’s performance in the first nine months of 2013 and the projected foreign exchange rates.

TRW is a leading manufacturer of advanced technology products and services for the automotive markets. Headquartered in Michigan, the company operates in 25 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 #2 (Buy).

TRW’s major customers include Ford Motor Co. (F - Analyst Report), General Motors Company (GM - Analyst Report) and Volkswagen AG (VLKAY). They account for nearly 50% of its revenues.
 

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