BorgWarner's Q4 Earnings In Line with Estimates, Down Y/Y - Analyst Blog
BorgWarner Inc. (BWA) posted a 5.1% decrease in adjusted earnings to 75 cents per share in the fourth quarter of 2014 from 79 cents in the prior-year quarter. However, earnings per share were in line with the Zacks Consensus Estimate.
Including the impact of non-comparable items, BorgWarner recorded earnings of $140 million or 61 cents per share in the fourth quarter of 2014, down from $141 million or 62 cents per share a year ago.
Revenues improved 6% year over year to $1.99 billion but missed the Zacks Consensus Estimate of $2.01 billion. The sales improvement was driven by global adoption of the powertrain technology and benefits from the Wahler takeover. Excluding the impact of foreign currencies and the Wahler acquisition, revenues went up 7% year over year.
Operating income increased to $212.2 million from $187.7 million in the fourth quarter of 2013. Adjusted operating income stood at $246 million, or 12.4% of net sales.
2014 Results
BorgWarner recorded all-time high adjusted earnings of $3.25 per share in 2014, marginally missing the Zacks Consensus Estimate of $3.26. In comparison, the company had generated earnings of $2.89 per share in 2013.
Net income (on a reported basis) amounted to $656 million or $2.86 per share, compared with $624 million or $2.70 per share in 2013.
Revenues increased 12% to $8.31 billion from $7.44 billion in 2013, narrowly missing the Zacks Consensus Estimate of $8.32 billion. Excluding the impact of foreign currencies and the Wahler acquisition, revenues went up 8% year over year.
Segment Details
Revenues in the Engine segment rose 9.3% year over year to $1.38 billion. Excluding the impact of foreign currencies and synergies from the Wahler acquisition, net sales went up 9% in the segment, driven by higher sales of turbochargers.
Adjusted earnings before interest, income taxes and non-controlling interest (adjusted EBIT) increased 9.7% to $228 million in the reported quarter from $208 million in the fourth quarter of 2013.
Revenues in the Drivetrain segment fell 2.1% to $615 million. Excluding the impact of foreign currencies, net sales increased 2% year over year on increased global sales of dual-clutch transmission modules, partly offset by the slow ramp up of a major program by a North American customer. Adjusted EBIT declined 6.8% to $66 million from $71 million in the fourth quarter of 2013.
Financial Position
BorgWarner had $797.8 million in cash as of Dec 31, 2014, compared with $939.5 million as of Dec 31, 2013. Total debt, including notes payable, stood at $1.34 billion as of Dec 31, 2014, compared with $1.22 billion as of Dec 31, 2013.
In 2014, net cash from operating activities increased to $802 million from $719 million in the prior-year comparable period. Capital expenditures, including tooling outlays, went up to $563 million from $418 million in 2013.
Business Update
In Nov 2014, BorgWarner opened a new production plant in Viana do Castelo, Portugal to expand its production capacity. This will help the company in meeting the increasing demand for exhaust gas recirculation technologies and glow plug control modules for passenger cars and commercial vehicles. The new plant has 50% larger manufacturing space compared to the previous plant. Moreover, it has provisions for further expansion if required.
Outlook
Net sales growth for 2015 is projected to be in the range of 2%–6%, driven by the demand for BorgWarner’s product technologies, which enhance fuel economy, emissions and performance. Excluding the impact of weak foreign currency, net sales for 2015 are forecasted to increase 9.5%–12%.
Net earnings for 2015 are expected to rise to $3.35–$3.55 per share. Also, net earnings (excluding the impact of weak currencies) are predicted to be in the band of $3.60–$3.75 per share, excluding non-recurring items.
Operating income, as a percentage of net sales, is expected to be more than 13% in 2015 due to higher net sales and cost management efforts. Effective tax rate of BorgWarner should be about 29% this year. Further, the company expects free cash flow of $350–$400 million in 2015.
BorgWarner currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Superior Industries International, Inc. (SUP), Tata Motors Ltd. (TTM) and Wabash National Corp. (WNC), all sporting a Zacks Rank #1 (Strong Buy).
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