TRW Automotive (TRW) shares jumped 14% this afternoon after the auto safety equipment company posted better than expected earnings despite declining margins. TRW makes airbags, seat belts and other devices and has benefited from the rebound in auto sales over the past year. EPS of $1.84 beat analysts expectations for $1.55.
Standard & Poor’s equity analyst Efraim Levy reiterated his Strong Buy recommendation on the shares following the report.
“Sales were slightly above our forecast but better gross margins were key to the outperformance. TRW should benefit from rising global automotive volume and higher demand for safety equipment in the U.S. and other markets, but weakness in the important European market should be a drag. After the reversal of its valuation allowance for deferred taxes, we expect TRW’s ’12 tax rate to rise significantly, although the company does not expect to pay U.S. cash taxes for years. Margin pressure should ease in 2013.”