UPDATE 3-TRW Automotive earnings rise, shares jump

(Recasts, add's analyst's remarks, stock activity)

By David Bailey

DETROIT Feb 21 (Reuters) - TRW Automotive Holdings Corp (TRW.N) posted a quarterly profit on Thursday that exceeded analysts' forecasts, supported by growth in auto safety product sales and its shares jumped as much as 14 percent.

TRW said higher customer vehicle production in Europe and China more than offset price cuts on its parts overall and declines in production by North American-based customers.

The company said it expects mounting challenges in 2008, especially in North America where its customers are expected to have significant vehicle production declines in the first half of the year. But the midpoint of TRW's 2008 forecast was above analysts' estimates.

Stronger-than-expected production in North America and Europe and improved operations after restructuring drove the better-than-expected fourth-quarter earnings, JP Morgan analyst Himanshu Patel said in a note to clients.

TRW's forecast "could calm some potential fears of downside risk to consensus given the weak (North American) production outlook," Patel added.

Net earnings rose to $56 million, or 55 cents per share, in the fourth quarter, from $33 million, or 32 cents per share, a year earlier.

Excluding tax benefits, TRW reported earnings of 44 cents per share in the quarter. Analysts on average expected TRW to report earnings of 39 cents per share on that basis, according to Reuters Estimates.

Revenue rose 19 percent to $3.89 billion. Analysts expected $3.69 billion.

TRW's strong earnings per share and free cash flow was evidence of improved execution on the cost side and "better positioning for TRW to navigate the (North America) volume headwinds we expect in 2008," Goldman Sachs analyst Robert Barry said in a note.

TRW Chief Executive John Plant said commodity cost inflation posed a significant challenge in the fourth quarter and would continue to hamper 2008 results to nearly the $100 million level that it pressured results in 2007.

"The business plan will again depend heavily on the strength of our safety portfolio, our customer diversity and our ability to achieve the appropriate level of cost reductions," Plant said on a conference call with analysts.

TRW expects North American production by General Motors Corp (GM.N), Ford Motor Co (F.N) and Chrysler LLC to be down about 800,000 vehicles in 2008, with three-quarters of that drop in the first half of the year.

That sharp decline in North American Big 3 production will leave TRW with an overall negative impact from production worldwide in 2008, Plant said. TRW expects production to hold relatively flat in Europe and to increase at a solid pace in South America, India and China.

Those North American declines add to concerns of a further weakening in the supply base that would increase pressure throughout the region as well, Plant said.

TRW, which produces safety equipment such as airbags and electronic stability controls, generates about 70 percent of its sales from Europe, Asia and South America, setting it apart from U.S.-based auto parts suppliers that have heavy exposure to North American production by U.S.-based customers.

The company has been expanding in lower-cost regions overseas to reduce costs and diversify its operations as well as refinancing debt.

TRW said it expects 2008 earnings per share of $2.15 to $2.45, while analysts expect $2.27.

The company forecasts 2008 revenue of $15.6 billion to $16 billion, while analysts expect $14.87 billion.

TRW shares were up $2.59, or 11.85 percent, at $24.45 Thursday on the New York Stock Exchange, after hitting $25 earlier in the session. Through Wednesday, the stock had risen about 4.6 percent in 2008. (Editing by Maureen Bavdek, editing by Dave Zimmerman)