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On Feb 19, we maintained our Neutral recommendation on TRW Automotive Holdings Corp. (TRW - Analyst Report), despite its lower earnings in the fourth quarter of fiscal 2012, based on its innovative technologies, which will boost the results of the company in near term.

Why Maintained?

TRW posted a 15.8% fall in profits to $1.55 per share in the fourth quarter of 2012 from $1.84 in the same quarter of 2011 (all excluding special items). However, the quarterly EPS surpassed the Zacks Consensus Estimate by 20 cents. Adjusted net income dipped 16.4% to $199 million from $238 million in the fourth quarter of 2011.

Revenues in the quarter inched up 1.2% to $4.0 billion, driven by higher demand for the company’s innovative technology products, increased vehicle production volumes in North America and China and a rise in module sales globally, partially offset by significantly lower vehicle production in Europe and the negative impact of currency movements.

Following the release of the fourth quarter results, the Zacks Consensus Estimate for fiscal 2013 dipped 0.9% to $6.33 per share. Meanwhile, the Zacks Consensus Estimate for fiscal 2014 remained unchanged at $7.55 per share. The company now has a Zacks Rank #3 (Hold).

TRW occupies a leading position in the automotive systems market. It commands about one-fifth of the world market for airbags, seatbelts and related electronics. In addition, the company’s continuous focus on improving its vast product portfolio will have favorable impacts on the results. This initiative will enable the company to differentiate from its peers.

Enforcement of the new regulation by the U.S. National Highway Traffic Safety Administration will boost the sales of the company significantly. This regulation, which requires all passenger cars to install side-impact safety devices from 2013 onwards, will benefit the company’s Occupancy Safety Systems division.

However, economic weakness in the European and North American markets will mar the company’s results. In addition, the company is under pressure due to the high customer concentration. The premium customer of the company commands nearly 50% of the company’s sales. Loss of any one of these customers or major production cutbacks by any of them could have a significant impact on the company’s operations.

Other Stocks to Look For

Few stocks that are performing well in the industry where TRW operates include Oshkosh Corporation (OSK - Snapshot Report), Strattec Security Corporation (STRT - Snapshot Report) and Magna International Inc. (MGA - Analyst Report). Oshkosh and Strattec Security are Zacks Rank #1 (Strong Buy) stocks while Magna International carries a Zacks Rank #2 (Buy).

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