BorgWarner (BWA) Q3 Earnings Beat Estimates, Guidance Trimmed

BorgWarner Inc. BWA reported adjusted earnings of 98 cents per share for third-quarter 2023, up from 80 cents recorded in the prior-year quarter. The bottom line also outpaced the Zacks Consensus Estimate of 91 cents per share.

The automotive equipment supplier reported net sales of $3,622 million, missing the Zacks Consensus Estimate of $3,720 million. The top line, however, increased by 12% year over year.

BorgWarner Inc. Price, Consensus and EPS Surprise

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

Segmental Performance

Air Management: Net sales totaled $1,945 million in the reported quarter compared with $1,843 million in the year-ago period. Sales, however, missed our estimate of $2,055.6 million. Adjusted operating income of $294 million rose from $291 million recorded in the year-ago quarter and topped our estimate of $293.2 million.

Drivetrain & Battery Systems: Net sales totaled $1,145 million in the reported quarter compared with $954 million in the year-ago period and surpassed our projection of $1,144.6 million. Adjusted operating income of $147 million increased from $103 million recorded in the year-ago quarter and topped our estimate of $131.2 million.

e-Propulsion: Sales from the segment were $571 million, up from $489 million a year ago but lagging our estimate of $645.8 million. The segment incurred an adjusted operating loss of $20 million, narrower than $33 million in the corresponding period of 2022 and our estimate of a loss of $27.5 million.

Financial Position

As of Sep 30, BorgWarner had $949 million in cash/cash equivalents/restricted cash compared with $1,083 million as of Dec 31, 2022. As of Sep 30, long-term debt was $3,665 million, down from $4,140 million recorded on Dec 31, 2022.

Net cash provided in operating activities from continuing operations was $221 million in the quarter under review. Capital expenditures and free cash flow totaled $185 million and $36 million, respectively.

Updated 2023 Guidance

For full-year 2023, the company anticipates net sales within $14.1-$14.3 billion, down from prior guidance of $14.2-$14.6 billion but indicating a year-over-year increase in organic sales of 12-14%.

Adjusted operating margin is expected in the band of 8.1-8.2%, down from the prior range of 9.2-9.6%. Adjusted earnings are estimated to be within $3.60-$3.80 per share compared with the previously guided range of $3.50-$3.85 per share. Operating cash is expected to be in the range of $1,200-$1,250 million. Free cash flow is projected in the band of $400-$450 million, down from the previously guided range of $400-$500 million.

The company expects its 2023 eProduct sales to be in the range of $2.0-$2.1 billion, up from approximately $1.5 billion in 2022.

Zacks Rank & Key Picks

BWA currently carries a Zacks Rank #3 (Hold).

Some top-ranked players in the auto space are Toyota Motor TM, Honda Motor Co., Ltd. HMC and Volvo VLVLY, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for TM’s 2023 sales and earnings implies year-over-year growth of 10.6% and 27.6%, respectively. The EPS estimates for 2023 and 2024 have increased by 4 cents and 21 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for HMC’s 2023 sales and earnings suggests year-over-year improvements of 7.7% and 29.4%, respectively. The EPS estimate for 2023 has moved up by a penny in the past 30 days. The EPS estimate for 2024 increased by a penny in the past seven days.

The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year rises of 4.6% and 64.4%, respectively. The EPS estimates for 2023 and 2024 have increased by 16 cents and 12 cents, respectively, in the past seven days.

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