Goldman Sachs Gives Color On Federal-Mogul Corp. Following Earnings; Lowers PT

Federal-Mogul Corp. FDML reported 4Q10 EBITDA of $170 mn slightly shy of Goldman's forecast of $172 mn and the Street of $173 mn. Goldman is revising its 2011/2012/2013 EBITDA estimates to $789 mn/$903 mn/$1,005 mn from $806 mn/$922 mn/$1,023 mn. Goldman's new estimates reflect: the flow through of 4Q results, slightly higher volume growth in the aftermarket, partially offset by weaker pricing due to incentives and, increased labor cost inflation. The six month price target goes to $24 from $26, previously. Revenue for the quarter came in at $1,589 mn, ahead of Goldman's $1,525 mn estimate but adjusted EBITDA margins of 10.7% fell short of its forecast of 11.3%. Going forward, Goldman expects a modest recovery in aftermarket sales driven by the company's entry into “mid-level” replacement parts to target more value oriented customers. Deferred vehicle maintenance and improving miles driven should also be a tailwind for aftermarket volumes. On the OE side, Goldman sees the company benefitting from both volume and content growth on the back of engine downsizing and a recovery in diesel penetration. In terms of margins, Goldman expects FDML to see some pressure from labor cost inflation, higher fixed costs to support growth in emerging markets, and slightly adverse pricing in the aftermarket as it promotes its new line of products. FDML closed Wednesday at $19.88