TRW Automotive shares rise on $1B buyback plan

NEW YORK -- TRW Automotive Holdings Corp. said Monday that its board approved a $1 billion share repurchase plan, prompting an analyst to reiterate a "Buy" rating on the auto parts maker's stock.

THE SPARK: TRW expects to repurchase stock over two years starting in the fourth quarter. It added that the program reflects its continued focus on boosting value for its shareholders.

THE BIG PICTURE: The Livonia, Mich.-based auto supplier makes a variety of automotive safety and electronic systems. A significant portion of its sales come from Europe, where new vehicle demand has fallen this year amid the continuing economic uncertainty there.

TRW also said that it completed the refinancing of its principal credit facility on Friday. The move increased the company's existing $1 billion revolving credit facility to $1.4 billion and extended its maturity to 2017. There are currently no loans drawn under the facility.

THE ANALYSIS: Jefferies analyst Peter Nesvold backed his "Buy" rating and $55 price target for the company, noting that the buyback program amounts to about 20 percent of TRW's market capitalization.

"TRW has been our top pick in autos this year for precisely this catalyst," Nesvold wrote in a note to investors.

But he noted that the buyback came a little earlier than expected, given the antitrust actions still pending against the company in Europe and the company's continued concerns about how far the European automotive market could fall before hitting bottom.

In July, TRW's German subsidiary agreed to pay a $5.1 million to settle antitrust violations with the U.S. Justice Department as part of a related investigation.

THE SHARES: Up $3.52, or 8.1 percent, to $47.23 in morning trading, after peaking at $48.54 earlier in the session. Over the past 52 weeks, the company's shares have traded between $28.85 and $49.08.