BorgWarner Inc. (BWA), TRW Automotive Holdings Corp. (TRW): Five Auto Parts Manufacturers Tuning Up Earnings

Lear Corporation (NYSE:LEA) shares have climbed steadily for about a year, and are, nonetheless a good long-term buy and hold, based on expansion of the P/E multiple (currently 9.7 times forward earnings) over time.

Commercial-vehicle supplier

This company is highlighted by its robust pace of earnings gains, and the trend is likely to remain solidly upward. Sales are apt to climb 5% to 8% this year, allowing for EPS to increase in the high single digit percentages.

New agreements and the expansion of production in emerging economies, including Russia, Brazil, and China, are major components of the company’s growth strategy. Meantime, it will focus on productivity gains.

I like this stock, once again, for its long-term price-appreciation potential. The forward P/E is 13.9, based on share earnings of $4.90 and $5.70 in 2013 and 2014.

A strong turnaround

1. Climate products comprised 62% of total 2012 sales.

2. Electronics offerings contributed 18% of the total.

3. Interiors offerings amounted to 20%.

The story here is new vehicle programs. Sales gains in the low double-digit percentages are stemming largely from new climate and electronics related agreements.

Visteon Corp (NYSE:VC) has been a beneficiary of strength at its two key customers, Hyundai and Ford, that together are attributable for more than 60% of total sales. It would likely fare well if these two entities continue to post growing sales totals.

In my view, Visteon Corp (NYSE:VC) shares are a good choice for 3- to 5-year price appreciation. Share earnings are likely to be boosted a bit by share buybacks, as well as sales gains.

Now what?

These stocks may appeal to those looking for price gains over the next several years, as the automotive production upturn persists and possibly even accelerates. Keep an eye on sales growth trends, which I believe will run in tandem with automotive production. It will be interesting to note whether Europe’s return to growth persists. If so, it could enable better performances at certain auto parts manufacturers.

After reviewing these five industry participants, the most enticing stock appears to be TRW Automotive Holdings Corp. (NYSE:TRW),. Its safety product line should help it outperform the broader industry, and the company sports at relatively low forward P/E valuation of 9.1. A close second is BorgWarner Inc. (NYSE:BWA), also operating in a sector — emissions controls — that ought to fare well in the long term.

The article 5 Auto Parts Manufacturers Tuning Up Earnings originally appeared on Fool.com is written by Damon Churchwell.

Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends BorgWarner.

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