Sterne Agee Downgrades BorgWarner Rating to ‘Neutral’
Yesterday’s Consumer Pops: HRL, CAJ, MDLZ, and WHR
Price movement of BorgWarner
BorgWarner (BWA) has a market cap of $7.1 billion. BWA rose by 2.1% to close at $32.40 per share on February 16, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movement was 11.6%, -1.4%, and -25.1%, respectively, as of that day.
At times, the stock has broken the support of all moving day averages. Currently, BWA is trading 9.7% above its 20-day moving average, 10.7% below its 50-day moving average, and 29.9% below its 200-day moving average.
VOT and competitors
The Vanguard Mid-Cap Growth ETF (VOT) invests 0.69% of its holdings in BorgWarner. The ETF tracks a market-cap-weighted index of mid-cap growth companies selected by the CRSP (Center for Research in Security Prices). The YTD price movement of VOT was -12.7% as of February 12, 2016.
The market caps of BorgWarner’s competitors are as follows:
Honeywell International (HON)—$80.9 billion
Cummins (CMI)—$17.6 billion
Tenneco (TEN)—$2.6 billion
BorgWarner’s performance in 4Q15 and 2015
Sterne Agee CRT downgraded BorgWarner rating from “buy” to “neutral” and set the price target at $40.0 per share due to mixed performance in 4Q15.
BorgWarner reported fiscal 4Q15 net sales of nearly $2.1 billion, which represents a rise of 6.6% compared to net sales of almost $2 billion in fiscal 4Q14. Sales of engines and drivetrains rose by 0.96% and 19.5%, respectively, in fiscal 4Q15, compared to fiscal 4Q14. Its net income and EPS (earnings per share) fell to $125.3 million and $0.56, respectively, in fiscal 4Q15, compared to $139.9 million and $0.61, respectively, in fiscal 4Q14.
Fiscal 2015 results
In fiscal 2015, BWA reported net sales of around $8 billion, which represents a fall of 3.4% YoY (year-over-year). Its net income and EPS fell to $609.7 million and $2.70, respectively, in fiscal 2015, compared to $655.8 million and $2.86, respectively, in fiscal 2014.
Meanwhile, its cash and cash equivalents fell by 27.6%, and inventories rose by 43.1% in fiscal 2015. Its current ratio fell to 1.3, and long-term debt-to-equity rose to 0.59 in fiscal 2015, compared to a current ratio and long-term debt-to-equity ratio of 1.4 and 0.19, respectively, in fiscal 2014.
The company has declared a quarterly cash dividend of $0.13 per share on its common stock. The dividend will be paid on March 15, 2016, to shareholders at the close of business on March 1, 2016.
The price-to-earnings and price-to-book value ratios of BorgWarner were 12.0x and 2.0x, respectively, as of February 16, 2016.
Projection
The company has made the following projections for fiscal 1Q16:
It expects net sales growth in the range of 8.3%–13.3%. After excluding the impact of foreign currencies and the Remy acquisition, net sales growth is expected to be in the range of -0.3%–2.7%.
It expects EPS in the range of $0.75–$0.79. After excluding the Remy acquisition, EPS is expected to be in the range of $0.72 to $0.76.
BorgWarner has made the following projections for fiscal 2016:
It expects net sales growth to be in the range of 13.2% to 18.3%. After excluding the impact of foreign currencies and the Remy acquisition, net sales growth is expected to be in the range of 2.5%–5.5%.
It expects EPS in the range of $3.11–3.32. After excluding the Remy acquisition, EPS is expected to be in the range of $2.98–$3.18.
It expects operating income as a percentage of net sales to be above 12%.
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