Will TRW Automotive (TRW) Stock Rebound After Its Acquisition By ZF Friedrichshafen?

NEW YORK (TheStreet) --Shares of TRW Automotive Holdings Corp. (TRW) are lower by 1.10% to $102.70 in mid-morning trading on Monday, despite the announcement that the automotive systems, modules, and components supplier will be acquired by the privately held German company ZF Friedrichshafen for $13.5 billion.

Last Thursday, speculation that the two companies were close to a deal pushed TRW Automotive stock higher.

ZF Friedrichshafen is offering to pay TRW $105.60 per share in cash, which represents a 1.7% premium to TRW's closing price of $103.85 on Friday, Reuters reports.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

"The combined company will be well positioned to capitalize on favorable megatrends in the automotive industry by bringing together complementary product offerings and leading technology positions that serve high-growth areas such as fuel efficiency, increased safety requirements, and autonomous driving," the two companies said in a statement.

The transaction is expected to close in the first half of 2015.

Separately, TheStreet Ratings team rates TRW AUTOMOTIVE HOLDINGS CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate TRW AUTOMOTIVE HOLDINGS CORP (TRW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, solid stock price performance, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Auto Components industry average. The net income increased by 6.8% when compared to the same quarter one year prior, going from $248.00 million to $265.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.0%. Since the same quarter one year prior, revenues slightly increased by 1.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 45.12% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TRW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The current debt-to-equity ratio, 0.44, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
  • You can view the full analysis from the report here: TRW Ratings Report

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