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BorgWarner Reports Lower Q3 Earnings On Slightly Higher Sales


BorgWarner Inc. (NYSE: BWA), a provider of technology solutions for combustion, hybrid and electric vehicles, reported lower third-quarter earnings on slightly higher sales.

Foreign currency exchange losses because of a strong U.S. dollar, a higher tax rate and lower equity in affiliates' earnings impacted profits, the company said. 

Net income in the third quarter 2019 was $194 million, or $0.94 per diluted share, compared with $204 million, or $0.98 per diluted share, in the third quarter 2018. 

Net sales in the quarter were $2.492 billion, up 0.6% from $2.478 billion. Excluding the impact of foreign currencies, net sales were up 4.2% from the prior year. 

According to investor site Seeking Alpha, analysts expected earnings per share of 85 cents. BorgWarner extended its two-year streak of beating EPS estimates. The consensus revenue estimate was $2.39 billion.

BorgWarner's divestiture of its thermostat product line decreased net sales by $29 million in the third quarter compared with a year ago and is expected to lower full-year sales by $90 million.  

By Segment

Engine segment net sales were $1.514 billion in the third quarter 2019 compared with $1.516 billion in third quarter 2018. 

Drivetrain segment net sales were $993 million in the third quarter 2019 compared with $976 million in the third quarter of 2018. 

Asbestos Liability Divested

BorgWarner said October 30 it has divested its subsidiary Morse TEC LLC to the U.S. subsidiary of Enstar Group Ltd. (NASDAQ: ESGR) to take over the operational management team of Morse TEC., including its asbestos claims and collection of existing insurance policies. 

BorgWarner made a $172 million cash payment to Morse TEC that is expected to reduce fourth-quarter earnings by about $40 million. 

Morse TEC holds $800 million in liabilities associated with personal injury asbestos claims and environmental claims arising from BorgWarner's legacy manufacturing operations.

Updated Guidance

BorgWarner said full-year net sales are expected to range between $9.95 billion and $10.1 billion, down 1.0% to flat. The company expects its blended light-vehicle market to decline 4.0% to 4.5% because of market volatility, particularly in China. 

Foreign currencies are expected to reduce sales by $375 million because of the depreciation of the Euro, Chinese Renminbi and Korean Won against the U.S. Dollar. 

Full-year net earnings are expected to range between $3.85 to $4 per diluted share.

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