BorgWarner (BWA) to Report Q4 Earnings: What’s in the Cards?

BorgWarner BWA is slated to release fourth-quarter 2022 results on Feb 9 before market open. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share and revenues is pegged at $1.04 and $3.89 billion, respectively.

For the fourth quarter, the consensus estimate for BWA’s earnings per share has moved upward by a cent in the past 30 days. Its bottom-line estimates imply a fall of 1.89% from the year-ago reported number. The Zacks Consensus Estimate for its quarterly revenues suggests a year-over-year increase of 6.48%. Over the trailing four quarters, BWA surpassed earnings estimates on all occasions, with the average surprise being 29.54%. This is depicted in the graph below:

BorgWarner Inc. Price and EPS Surprise

BorgWarner Inc. price-eps-surprise | BorgWarner Inc. Quote

Q3 Highlights

In the third quarter of 2022, BWA reported adjusted earnings per share of $1.24, up from 80 cents recorded in the prior-year quarter. It also surpassed the consensus metric of $1.02. Higher-than-anticipated revenues from Fuel Systems and Aftermarket segments resulted in the outperformance.

The company reported net sales of $4,060 million, outpacing the Zacks Consensus Estimate of $3,977 million. The top line, however, also moved up 18.8% year over year.

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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: BWA has an Earnings ESP of -1.57%. This is because the Most Accurate Estimate is pegged 2 cents lower than the Zacks Consensus Estimate.

Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Things to Note

The acquisition of Delphi Technologies and AKASOL has strengthened BorgWarner’s electric propulsion leadership and will boost top-line growth. The buyout of Rhombus Energy has helped BorgWarner expand its existing European charging footprint to North America. The charging business has mushroomed further with the acquisition of SSE in China. The acquisition of Santroll’s light vehicle eMotor business has increased BorgWarner’s scale in eMotor product leadership while also improving manufacturing capabilities. All these acquisitions are likely to fuel BorgWarner’s upcoming results.

On the other hand, the supply chain shortage, rising commodity prices and high SG&A costs are likely to have played spoilsport. The divestiture of the Water Valley, MS, business is likely to limit fourth-quarter revenues. Moreover, unfavorable forex translations due to the weakening Euro, Korean Won and Chinese Renminbi against the U.S. dollar are also expected to have clipped margins to some extent. High research and development costs associated with electrification-related programs and e-product growth are also anticipated to have dented profits.

Here’s a sneak peek at the firm’s revenue and EBIT projections for the to-be-reported quarter.

The Zacks Consensus Estimate for BorgWarner’s Air Management segment’s sales is pegged at $1,862 million, suggesting a drop from $1,908 million reported in the previous quarter. EBIT from the segment is estimated at $248 million, suggesting a drop from $277 million recorded in the previous quarter.

The consensus mark for fourth-quarter sales from the e-Propulsion & Drivetrain segment is pegged at $1,367 million, suggesting a drop from the $1,371 million registered in the preceding quarter. However, the segmental EBIT estimate of $107 million marks an increase from $86 million generated in the third quarter of 2022.

The consensus mark for the Fuel Injection unit’s quarterly sales is pegged at $555 million, down from $600 million reported in the third quarter. The EBIT for the segment is pegged at $66 million, indicating a drop from $83 million.

The consensus mark for quarterly sales from the Aftermarket unit is pegged at $236 million, indicating a fall from $327 million recorded in the previous quarter. The EBIT for the segment stands at $36.46 million, indicating a drop from $49 million.

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 quarter to be reported:

Allison Transmission Holdings ALSN will release fourth-quarter 2022 results on Feb 15. The company has an Earnings ESP of +3.06% and a Zacks Rank #3.

The Zacks Consensus Estimate for Allison’s to-be-reported quarter’s earnings and revenues is pegged at $1.21 per share and $676 million, respectively. ALSN surpassed earnings estimates in three of the trailing four quarters and missed in one quarter, with an average surprise of 10.27%.

LKQ LKQ will release fourth-quarter 2022 results on Feb 23. The company has an Earnings ESP of +3.78% and a Zacks Rank #3.

The Zacks Consensus Estimate for LKQ’s to-be-reported quarter’s earnings and revenues is pegged at 84 cents per share and $3.01 billion, respectively. LKQ surpassed earnings estimates in all the trailing four quarters, with an average surprise of 7.96%.

Rivian Automotive RIVN will release fourth-quarter 2022 results on Feb 28. The company has an Earnings ESP of +2.93% and a Zacks Rank #3.

The Zacks Consensus Estimate for Rivian’s to-be-reported quarter’s loss per share and revenues is pegged at $1.88 per share and $711 million, respectively. RIVN surpassed earnings estimates in two of the trailing four quarters and missed in the rest, with the average negative surprise being 12.63%.

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