BorgWarner's (BWA) Q2 Earnings Beat Estimates, Revenues Miss

BorgWarner Inc. BWA delivered adjusted earnings of $1.18 per share in second-quarter 2018, beating the Zacks Consensus Estimate of $1.10. The figure also increased from 96 cents per share in the year-ago quarter. Net earnings rose to $272 million from the prior-year quarter figure of $212 million.

BorgWarner reported revenues of $2.69 billion, missing the Zacks Consensus Estimate of $2.72 billion. The figure was $2.39 billion in the year-ago quarter. The acquisition of Sevcon contributed $18 million to the net sales figure.

In the reported quarter, operating income amounted to $312.8 million compared with prior-year’s figure of $298.1 million.

BorgWarner Inc. Price, Consensus and EPS Surprise

BorgWarner Inc. Price, Consensus and EPS Surprise | BorgWarner Inc. Quote

Segment Details

Revenues from the Engine segment increased to $1.67 billion from $1.48 billion in the prior-year quarter. Excluding the impact of foreign currencies, net sales rose 7.2% in the segment. Adjusted EBIT came in at $279 million. Excluding impact of foreign currencies and the acquisition of Sevcon, the figure was $268 million, a rise of 10% from the year-ago quarter.

At the Drivetrain segment, revenues were up $1.03 billion in the second quarter from $921 million in the prior-year quarter. Excluding the impact of foreign currencies and acquisition of Sevcon, net sales rallied 7.4% year over year. Adjusted EBIT came in at $116 million. Excluding impact of foreign currencies and the acquisition of Sevcon, the figure was $118 million, a rise of 7.7% from the prior-year quarter.

Financial Position

BorgWarner had $361.9 million in cash as of Jun 30, 2018 compared with $545.3 million as of Dec 31, 2017. The long-term debt was $2.1 billion almost in line with the figure recorded as of Dec 31, 2017.

At the end of six months of 2018, net cash provided by operating activities was $305 million compared with $399 million in the prior-year quarter. During the quarter, capital expenditures, including tooling outlays, increased to $269 million from $254 million in first-half of 2017.

Dividend

The company announced that its board has approved a quarterly cash dividend of 17 cents per common stock. The amount will be paid on Sep 17, 2018 to shareholders as of Sep 4, 2018.

Outlook

For third-quarter 2018, the company envisions net earnings per share to lie within the range of $1.03-$1.06. Moreover, it anticipates net organic sales growth of 4.5-6.5% compared with net sales of $2.42 billion in the year-ago quarter. The Sevcon acquisition will contribute $16 million to net sales.

For full-year 2018, the company has increased its organic growth guidance. BorgWarner projects net sales to be $10.64-$10.75 billion from the prior expectation of $10.77-$10.94 billion. The new estimations imply organic growth of 6-7% compared with the previous range of 5-7%. Further, the company projects net earnings within the range of $4.45-$4.50, an increase from the previous guidance of $4.30-$4.40.

Zacks Rank & Key Picks

BorgWarner currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Fox Factory Holding Corporation FOXF, Oshkosh Corporation OSK and AB Volvo VLVLY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 15.8%. Over a year, shares of the company have gained 30.2%.

Oshkosh has an expected long-term growth rate of 18.3%. Over a year, shares of the company have gained 5.3%.

Volvo has an expected long-term growth rate of 15%. Shares of the company have risen 2.9% in the past year.

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