TRW Automotive TRW reported solid earnings for the third quarter, and we are leaving our fair value unchanged. The company posted a GAAP profit of $0.50 per diluted share and $0.68 per diluted share excluding restructuring charges. Like almost all other auto stocks we cover, TRW posted strong sequential revenue and margin improvement thanks to cost-cutting and increases in light-vehicle production. Liquidity was also respectable, at more than $1.6 billion including unused credit lines. Net debt at Oct. 2 was about $2 billion, just as it was at the end of 2008. However, debt/equity has improved to 1.46 from 2.21 over the same period, in part from the $269 million raised in the third-quarter equity offering. We think the worst times are past for TRW and the company should return to being free cash flow positive in 2010. Two potential issues for 2010 are rising commodity costs as the global economy keeps improving and the uncertainty about European auto demand in the absence of government scrappage programs. Management said during its earnings call that it thinks it can utilize its U.S. deferred tax assets over the next three to five years. The company holds $1 billion in net operating losses in its U.S. operations.
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Analyst Notes
08-10-09 | 11:07AM TRW Announces Equity Offering
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