Solid Quarter for Federal-Mogul: Full Speed Ahead

Federal-Mogul Corporation (NASDAQ:FDML) has revealed a profit of $46 million or 43 cents per share in the fourth quarter of 2009, in stark contrast to a loss of $532 million or $5.36 per share in the year-ago quarter.

The profit also significantly increased from the Zacks Consensus Estimate of 14 cents per share. The improvement was attributable to higher sales and effective restructuring and cost reduction initiatives.

Sales increased 8% to $1.4 billion in the quarter. This was driven by Federal-Mogul’s continued effort to expand its market share position manufacturing capacity and engineering presence in China, India, Brazil and other growth markets which have performed better during the global automotive downturn.

Consequently, about 7% of the total revenue was generated outside the U.S., Canada and Europe in the quarter, representing a 24% increase over the prior-year quarter.

Gross margin improved to $225 million or 16% of sales in the quarter from $183 million or 13.9% of sales in the same period of 2008. This reflected the benefits from restructuring and cost reduction initiatives during 2009.

Annual Results

Federal-Mogul witnessed a narrower loss of $33 million or 46 cents per share in full-year 2009 versus a loss of $465 million or $4.69 per share in the previous year. However, the loss was wider than the Zacks Consensus Estimate of a loss of 35 cents per share.

Sales in the year dipped 22% to $5.3 billion due to a downturn in the global automotive and financial market. On a constant dollar basis, the company's sales were down 19% on a year-over-year basis.

Financial Position

Federal-Mogul had cash and cash equivalents of $1 billion as of December 31, 2009, an improvement from $888 million as of December 31, 2008. Long-term debt was $2.8 billion as of that date. Long-term debt to capitalization ratio was as high as 73%.

In 2009, cash flow from operations decreased to $328 million from $627 million in the previous year. However, capital expenditures declined as well to $176 million from $320 million in 2008.

Based in Southfield, Michigan, Federal-Mogul -- which operates as a subsidiary of Icahn Enterprises, L.P. -- is a manufacturer and distributor of parts, components, modules and systems to the automotive, small engine, heavy-duty, marine, railroad, aerospace and industrial markets worldwide. Its principal customers include original equipment manufacturers of vehicles and industrial products, and aftermarket retailers and wholesalers.

Federal-Mogul is a Zacks #2 Rank (Buy) stock. Based on the strong results, the stock price improved more than 2% to $16.11 after the market closed yesterday.