TRW Reports 4Q EPS And Revenue Beat

Deutsche Bank has published a research report on TRW Automotive TRW after the company reported 4Q EPS and revenue beat. In the report, Deutsche Bank writes "TRW reported EPS of $1.72 and EBITDA of $426MM vs consensus of $1.24 and $406MM. The beat came largely on the revenue line, where TRW achieved $3.71 bn vs consensus of $3.50 bn. Growth ex currency of 13% was well above global production growth of 9%. EBIT / EBITDA margin of 8.3% / 11.5% was slightly below consensus of 8.5% / 11.6%, so conversion on the revenue growth was a bit lower than expected, at 13% vs 2010YTD in the mid-20's. Although we'd note that incremental margin in 4Q10 is inline with our FY2011 estimates, and now our bridge to 2011 is at a much higher starting point. Free Cash Flow was extremely strong, $236MM vs our est of $153MM, when considering that TRW made an un-forecasted $170MM discretionary pension contribution. Based on this discretionary contribution and actions to freeze further U.S. salaried pension accruals, the company stated its pension / OPEB liabilities were reduced by $427MM compared to 2009YE (approximately $2.25 accretive to our target price). Net debt as of 2010YE was $768MM vs our forecast of $877MM. The company disclosed FY2011 revenue guidance of $14.9 bn - $15.3 bn, above our $14.9 bn estimate but somewhat below consensus of $15.4 bn. Assumptions behind guidance look conservative, as NA production +7% and Europe flat compares to our forecasts of +8.4% / +1.4%." Deutsche Bank maintains its Buy rating and $70 price target. TRW Automotive closed yesterday at $59.64.