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BorgWarner (BWA) Q4 Earnings Surpass Estimates, Improve Y/Y

Zacks Equity Research

BorgWarner Inc. BWA has delivered adjusted earnings of $1.21 per share in fourth-quarter 2018, beating the Zacks Consensus Estimate of $1.07. The figure also increased from $1.07 per share recorded in the year-ago quarter. Net earnings were $230 million against net loss of $146.2 million in the prior-year quarter.

BorgWarner’s net sales declined 0.5% year over year to $2.57 billion, beating the Zacks Consensus Estimate of $2.56 billion. Net sales decreased roughly $65 million, owing to foreign currency fluctuation.

In the reported quarter, operating income amounted to $266 million compared with the prior-year figure of $208 million.

BorgWarner Inc. Price, Consensus and EPS Surprise

 

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

2018 Results

In 2018, the company’s net earnings increased to $931 million or $4.44 per share from $440 million or $2.08 per share in 2017.

Net sales for the year went up 7.5% year over year to $10.5 billion.

Segment Details

Net sales from the Engine segment decreased to $1.54 billion from $1.58 billion in the prior-year quarter. Excluding impacts of foreign currencies, the segment’s net sales rose 0.4% year over year and adjusted EBIT (earnings before interest, income taxes and non-controlling interest) declined 5.9% to $243 million.

At the Drivetrain segment, net sales increased to $1.05 billion in the fourth quarter from $1.02 billion in the prior-year quarter. Excluding impacts of foreign currencies, net sales improved 4.4% on a year-over-year basis and adjusted EBIT increased 7.4% to $133 million.

Financial Position

As of Dec 31, 2018, BorgWarner had $739.4 million in cash compared with $545.3 million as of Dec 31, 2017. Long-term debt was $1.9 billion, decreasing from $2.1 billion recorded at the end of 2017.

At the end of 2018, net cash provided by operating activities was $1.13 billion compared with $1.18 billion in the prior year. During the year, capital expenditure, including tooling outlays, decreased to $546.6 million from $560 million in 2017.

Dividend Announcement

The company’s board approved a quarterly cash dividend of 17 cents per common stock, which is payable on Mar 15, 2019, to shareholders of record as of Mar 1, 2019.

Outlook

For first-quarter 2019, the company’s net organic sales are likely to decline 5.5-7.5% from net sales of $2.8 billion in the year-ago quarter. Further, it envisions net earnings of 92-96 cents per share.

For 2019, BorgWarner anticipates net sales of $9.90-$10.37 billion and net earnings of $4-$4.25 per share. Further, operating margin is expected to be 11.9-12.2%.

Zacks Rank & Stocks to Consider

BorgWarner currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are General Motors Company GM, Allison Transmission Holdings, Inc. ALSN, and Oshkosh Corporation OSK, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Motors has an expected long-term growth rate of 8.5%. Share price of the company has increased 10.7% in the past three months.

Allison has an expected long-term growth rate of 10%. Over the past three months, shares of the company have gained 4%.

Oshkosh has an expected long-term growth rate of 11.3%. Shares of the company have gained 18.9% in the past three months.

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