TRW Automotive Holdings Corp. - Momentum

TRW Automotive Holdings Corp. (TRW) continues to trade near its 52-week high on strong Q4 results from mid February that included a 40% earnings surprise. With an average earnings surprise of 79% over the last four quarters and rising estimates, this Zacks #1 rank stock has the right parts for momentum.

Company Description

TRW Auto Holdings Corp, together with its subsidiaries, designs and manufactures automotive systems and equipment to original manufacturers and after markets. The company was founded in 1904 and has a market cap of $7.1 billion.

We got an update on TRW’s business on February 17 when the company reported strong Q4 results that came in well ahead of expectations.

Fourth-Quarter Results

Revenue for the period was up 10% from last year to $3.7 billion. Earnings came in at $1.72, a 40% ahead of the Zacks Consensus Estimates, where the company has an average earnings surprise of 79% over the last four quarters.

The company noted that its strong results were the simple product of higher volumes on the global economic rebound, and higher margins, with operating margin expanding to 8.3% from 7.9% last year when removing one-time charges.

Financial Profile

TRW has used its strong earnings momentum to strengthen its balance sheet, with cash and equivalents up $444 million from last year to $1.1 billion. Total debt was down $525 to $1.85 billion.

Estimates

We saw some decent movement in estimates off the god quarter, with the current year adding 23 cents to $6.61 while the next-year estimate gained 16 cents to $6.97, a respectable 5.5% growth projection.

Valuation

But in spite of the recent gains, the valuation picture still looks solid, with a forward P/E of 9X against its peer average of 11X.

12-Month Chart

On the chart, shares have been trending higher for most of the last 9 months, recently hitting a new 52-week high before pulling back on general market volatility. Look for support from the long-term trend on any more weakness. Take a look below.