What's in the Offing for BorgWarner (BWA) in Q2 Earnings?
BorgWarner BWA is slated to release second-quarter 2023 results on Aug 2 before market open. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share and revenues is pegged at $1.13 and $4.35 billion, respectively.
For the second quarter, the consensus estimate for BWA’s earnings per share has moved south by a cent in the past seven days. Its bottom-line estimates imply a rise of 7.6% from the year-ago reported number.
The Zacks Consensus Estimate for its quarterly revenues suggests a year-over-year increase of 15.8%.
Over the trailing four quarters, BWA surpassed earnings estimates on three occasions and missed once, the average surprise being 15.32%. This is depicted in the graph below:
BorgWarner Inc. Price and EPS Surprise
BorgWarner Inc. price-eps-surprise | BorgWarner Inc. Quote
Q1 Highlights
In the first quarter of 2023, BWA reported adjusted earnings per share of $1.09, up from $1.05 recorded in the prior-year quarter, but it fell short of the consensus metric of $1.13.
The company reported net sales of $4,180 million, missing the Zacks Consensus Estimate of $4,214 million. The top line, however, moved up 7.9% year over year.
Things to Note
BorgWarner is on track to achieve more than $5.6 billion in revenues by 2025 through eProducts sales, owing to new business awards and strategic actions.
The buyout of Rhombus Energy, completed in August 2022, complements BorgWarner’s existing European charging footprint and expands the firm’s portfolio in North America. The acquisition of the charging business of SSE in China will expand BorgWarner's footprint beyond Europe and North America. BWA’s strategic action and growing footprint are likely to have aided its results in the quarter under review.
On the flip side, BorgWarner has been bearing the brunt of high SG&A costs over the past several quarters and the trend is likely to have clipped margins in the quarter under review. The company expects a $60-$70 million increase in e-products R&D investment in 2023.
High research and development costs, associated with electrification-related programs and e-product growth, are likely to have limited its margins in the second quarter.
Here's a sneak peek at the firm’s revenues and EBIT projections for the to-be-reported quarter.
Our estimate for BorgWarner’s Air Management segment’s second-quarter sales is pegged at $1,958.5 million, suggesting a drop from $1,979 million reported in the previous quarter. EBIT from the segment is estimated at $294.1 million, suggesting a rise from $285 million recorded in the previous quarter.
For the second quarter, our forecast for the Drivetrain & Battery Systems segment is pegged at $1,013 million, suggesting a rise from the $955 million registered in the preceding quarter. Also, the segmental EBIT estimate of $122.5 million marks a rise from $110 million generated in the first quarter of 2023.
Our forecast for the ePropulsion segment is pegged at $520 million, suggesting a rise from the $487 million registered in the previous quarter. Our estimate for loss before interest and taxes is pegged at $28.3 million, narrower than the loss of $34 million incurred in the first quarter of 2023.
We estimate the Fuel System unit’s quarterly sales at $611.1 million, up from $568 million reported in the first quarter. The EBIT for the segment is pegged at $61.2 million, indicating a rise from $48 million.
Our estimate for quarterly sales from the Aftermarket unit is pinned at $349.6 million, indicating a rise from $330 million recorded in the previous quarter. The EBIT for the segment stands at $54 million, indicating a rise from $45 million.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for the original equipment manufacturer for the quarter to be reported as it does not have the right combination of the two key ingredients. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as stated below.
Earnings ESP: BWA has an Earnings ESP of -6.14%. This is because the Most Accurate Estimate is pegged 7 cents lower than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #3.
Stocks With the Favorable Combination
Let’s take a look at some players from the auto space that, according to our model, have the right combination of elements to post an earnings beat for the respective quarters to be reported:
Cummins Inc. CMI will release second-quarter 2023 results on Aug 3. The company has an Earnings ESP of +0.82% and carries a Zacks Rank #3.
The Zacks Consensus Estimate for Cummins’ to-be-reported quarter’s earnings and revenues is pegged at $5.18 per share and $8.28 billion, respectively. CMI surpassed earnings estimates in two of the trailing four quarters and missed twice, the average negative surprise being 3.17%.
American Axle & Manufacturing Holdings, Inc. AXL will release second-quarter 2023 results on Aug 4. The company has an Earnings ESP of +14.87% and carries a Zacks Rank #3.
The Zacks Consensus Estimate for American Axle’s to-be-reported quarter’s earnings and revenues is pegged at 7 cents per share and $1.56 billion, respectively. AXL surpassed earnings estimates in three of the trailing four quarters and missed once, the average negative surprise being 153.99%.
Magna International MGA will release second-quarter 2023 results on Aug 4. The company has an Earnings ESP of +1.06% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Magna’s to-be-reported quarter’s earnings and revenues is pegged at $1.25 per share and $10.17 billion, respectively. MGA surpassed earnings estimates in one of the trailing four quarters and missed thrice, the average negative surprise being 6.46%.
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BorgWarner Inc. (BWA) : Free Stock Analysis Report
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