BorgWarner posts 3rd-qtr profit on cost cuts

BorgWarner posts 3rd-quarter profit on cost-cutting, favorable comparison with 3Q 2008

• On 2:40 pm EDT, Wednesday October 28, 2009

AUBURN HILLS, Mich. (AP) -- Auto parts manufacturer BorgWarner Inc. posted a better-than-expected third-quarter profit Wednesday on lower revenue, crediting cost-cutting and a favorable comparison with the same period last year when the auto parts maker took hefty charges.

Still, shares fell sharply in afternoon trading, losing $2.08, or 6.4 percent, to $30.36. One analyst said the company's underlying performance in the quarter was disappointing.

BorgWarner reported net income of $17.2 million, or 15 cents per share, compared with a loss of $130.4 million, or $1.12 per share a year earlier. Analysts surveyed by Thomson Reuters expected, on average, earnings of 10 cents per share.

Last year's third quarter included charges totaling $1.58 per share for restructuring, goodwill related to an acquisition and other actions.

Revenue for the quarter ended Sept. 30 was $1.03 billion, down 22 percent from $1.32 billion in the year-ago period. Analysts expected revenue of $1.01 billion, according to Thomson Reuters.

CEO Timothy Manganello said he is cautiously optimistic about the fourth quarter with production volumes in North America expected to be higher than in the third quarter. However, he said visibility in Europe remains "limited due to uncertainty surrounding consumer demand, the impact of expiring government-sponsored incentive programs and other market dynamics."

"Ultimately, we expect it to be another profitable quarter for our company," he said.

Brett D. Hoselton, an analyst at KeyBanc Capital Markets, said in a client note that BorgWarner beat Wall Street's expectations, but the "underlying operating performance was disappointing."

Much of the reason for the company exceeding expectations was due to a lower than expected tax expense of $1.5 million, he said.

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