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BorgWarner Inc. (NYSE:BWA): Are Analysts Right About The Drop In Earnings?

Simply Wall St

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In March 2019, BorgWarner Inc. (NYSE:BWA) released its earnings update. Generally, the consensus outlook from analysts appear pessimistic, with profits predicted to drop by 4.4% next year. Though this outlook is not unsubstantiated given the negative earnings growth rate over the past five years on average. Presently, with latest-twelve-month earnings at US$931m, we should see this fall to US$890m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for BorgWarner

Exciting times ahead?

The longer term expectations from the 17 analysts of BWA is tilted towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of BWA's earnings growth over these next few years.

NYSE:BWA Past and Future Earnings, July 18th 2019

By 2022, BWA's earnings should reach US$1.1b, from current levels of US$931m, resulting in an annual growth rate of 10%. This leads to an EPS of $5 in the final year of projections relative to the current EPS of $4.47. With a current profit margin of 8.8%, this movement will result in a margin of 9.5% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For BorgWarner, I've put together three fundamental aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is BorgWarner worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BorgWarner is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of BorgWarner? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.