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BorgWarner's (BWA) Q3 Earnings Top Estimates, Guidance Up

Zacks Equity Research
·3 min read

BorgWarner Inc. BWA reported adjusted diluted earnings of 88 cents per share in third-quarter 2020, beating the Zacks Consensus Estimate of 75 cents. Higher-than-anticipated revenues from the Drivetrain segment resulted in this outperformance. Revenues from the segment came in at $1,075 million, surpassing the Zacks Consensus Estimate of $964 million.

However, the bottom line declined 8.3% from the year-ago quarter’s profit of 96 cents per share.

This automotive equipment supplier reported net sales of $2,534 million, outpacing the Zacks Consensus Estimate of $2,378 million. Moreover, the top-line figure comes in 2% higher than the year-ago quarter’s $2,492 million.

In the September-end quarter, operating income amounted to $284 million, as against the prior-year quarter’s profit of $276 million.

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

Net sales in the Engine segment fell to $1,476 million from the year-ago quarter’s $1,514 million. The sales figure also lagged the Zacks Consensus Estimate of $1,487 million. Excluding the impact of foreign-currency translation, net sales were down 4% year over year and adjusted EBIT (earnings before interest, income taxes and non-controlling interest) slipped 6.6% to $225 million chiefly on lower revenues.

In the Drivetrain segment, net sales increased to $1,075 million from the $993 million reported in the year-earlier quarter. Excluding the impact of foreign-currency translations, net sales increased 8%, year over year, and adjusted EBIT surged to $131 million from the prior-year level of $100 million on higher revenues.

Financial Position

As of Sep 30, 2020, BorgWarner had $2,121 million in cash compared with $832 million as of Dec 31, 2019. In the July-September quarter, long-term debt was $2,787 million, up from the $1,674 million recorded at the end of 2019.

Net cash provided by operating activities was $481 million during the third quarter compared with the $357 million recorded in the year-ago period. Investment in capital expenditure, including tooling outlays was $91 million in the September-end quarter compared with the year-ago quarter’s $102 million.

Outlook

For the ongoing quarter, net sales are expected in the range of $3.46-$3.61 billion. Also, adjusted operating margin is projected at 8.8-9.6%.

For full-year 2020, the company anticipates net sales of $9.7-$9.85 billion, up from the previous estimate of $8-$8.4 billion. Free cash flow is expected in the band of $475-$525 million this year, up from the prior projection of $300-$400 million. Moreover, current-year operating cash flow is expected in the range of $900 million to $975 million, up from the prior guidance of $700-$850 million.

Zacks Rank & Stocks to Consider

BorgWarner currently carries a Zacks Rank #3 (Hold). Shares of the company have depreciated 6.1%, year to date, while the industry witnessed a fall of 15.5%.

Some better-ranked stocks in the auto sector are Lear Corporation LEA, Autoliv Inc ALV and LCI Industries LCII, all of which sport a Zacks Rank of 1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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