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BorgWarner (BWA) Beats on Q4 Earnings, Announces Buyout Deal

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BorgWarner Inc. BWA reported adjusted earnings of $1.06 per share for fourth-quarter 2021, declining from $1.18 recorded in the prior-year period. The bottom line, however, beat the Zacks Consensus Estimate of 74 cents per share. Higher-than-anticipated revenues across all segments resulted in the outperformance. The automotive equipment supplier reported net sales of $3,655 million, outpacing the Zacks Consensus Estimate of $3,462 million. The top-line figure, however, declined 6.9% year over year.

Along with its earnings release, BorgWarner announced that it has inked a deal to acquire Santroll's light vehicle eMotor business for up to ¥1.4 billion. The buyout would bolster BorgWarner's scale and position in electric propulsion systems. Subject to satisfactory closing conditions, the deal is scheduled for closure by March-end.

BorgWarner Inc. Price, Consensus and EPS Surprise

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

BorgWarner Inc. price-consensus-eps-surprise-chart | BorgWarner Inc. Quote

Segmental Performance

Air Management: Net sales totaled $1,762 million for the reported quarter compared with $1,942 million registered in the year-ago period. The sales figure, however, topped the Zacks Consensus Estimate of $1,710 million. Adjusted EBIT of $257 million declined from $301 million recorded in fourth-quarter 2020.

e-Propulsion & Drivetrain: Sales from the segment came in at $1,352 million, down from $1,447 million in fourth-quarter 2020. The sales figure, however, came ahead of the Zacks Consensus Estimate of $1,257 million. The segment generated an adjusted EBIT of $132 million for fourth-quarter 2021 compared with $164 million recorded in the corresponding period of 2020.

Fuel Injection: Sales from the segment totaled $451 million, down from $479 million generated in the comparable year-ago period. The metric, however, surpassed the consensus estimate of $413 million. The segment generated an adjusted EBIT of $62 million, up from $39 million recorded in the corresponding period of 2020.

Aftermarket: Sales from the segment totaled $203 million, up 4.6% year over year. The figure outpaced the Zacks Consensus Estimate of $188 million. The segment generated an adjusted EBIT of $25 million, up from $22 million recorded in the corresponding period of 2020.

Financial Position

As of Dec 31, 2021, BorgWarner had $1,841 million in cash compared with $1,650 million on Dec 31, 2020. For the December-end quarter, long-term debt was $4,261 million, up from $3,738 million recorded on Dec 31, 2020.

Net cash provided by operating activities was $1,306 million for 2021. Capital expenditure and FCF totaled $666 million and $640 million, respectively.

2022 Projections

For full-year 2022, the Zacks Rank #3 (Hold) company anticipates net sales within $15.9-$16.5 billion, indicating an increase from $14.8 billion recorded in 2021. Importantly, BorgWarner envisions electric vehicle revenues of more than $800 million in 2022, doubling from 2021 levels.

Adjusted operating margin and net earnings are expected in the band of 10.2-10.7% and $3.71-$4.19, respectively. Free cash flow is projected in the band of $700-$800 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Below we have highlighted major takeaways from the latest quarterly releases of a few other auto equipment providers including Magna International MGA, Adient plc ADNT and Autoliv, Inc. ALV.

Magna reported fourth-quarter 2021 adjusted earnings of $1.30 per share, declining 54% from $2.83 in the year-ago quarter. The bottom line, however, topped the Zacks Consensus Estimate of 83 cents per share. For the reported quarter, net sales declined 13.8% from the prior-year period to $9,110 million but topped the consensus mark of $8,940.8 million.

Magna expects full-year 2022 revenues in the band of $38.8-$40.4 billion. Adjusted EBIT margin is anticipated to be 6-6.4%. The company envisions capital spending of $1.8 billion in 2022.

Adient reported an adjusted loss per share of 38 cents for first-quarter fiscal 2022. The Zacks Consensus Estimate was pegged at earnings of 8 cents per share. The bottom line also compared unfavorably with the year-ago earnings of $1.71 per share. Net sales of $3,480 million were down from $3,848 million recorded in the prior-year period. The top line, however, surpassed the Zacks Consensus Estimate of $3,381.5 million.

ADNT envisions 2022 revenues of $14.8 billion and capital expenditure of $300-$325 million. Expected equity income has been increased to $90 million for fiscal 2022 from the prior estimation of $80-$90 million.

Autoliv reported fourth-quarter 2021 adjusted earnings of $1.30 per share, on par with the Zacks Consensus Estimate. The bottom line fell 40.6% from $2.19 per share recorded in the year-ago quarter. The company reported net sales of $2,119 million for the quarter, which missed the Zacks Consensus Estimate of $2,249.7 million. The top line also declined 15.8% from the prior-year’s $2,516.8 million.

Given IHS Markit’s forecast of 9% growth in light vehicle production along with ALV’s positive regional mix and product launches, the company expects sales to grow organically by 20% in 2022, with adjusted operating margin expectation of 9.5% for full-year 2022.


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