Last week, you might have seen that BorgWarner Inc. (NYSE:BWA) released its yearly result to the market. The early response was not positive, with shares down 6.7% to US$31.80 in the past week. It was not a great result overall. While revenues of US$14b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 16% to hit US$2.70 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we’ve gathered the latest statutory forecasts to see what the analysts are expecting for next year.
View our latest analysis for BorgWarner
Taking into account the latest results, the most recent consensus for BorgWarner from 16 analysts is for revenues of US$14.7b in 2024. If met, it would imply a modest 3.6% increase on its revenue over the past 12 months. Per-share earnings are expected to bounce 35% to US$3.72. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$15.3b and earnings per share (EPS) of US$4.15 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the US$42.40 price target, showing that the analysts don’t think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values BorgWarner at US$72.00 per share, while the most bearish prices it at US$33.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that BorgWarner’s revenue growth is expected to slow, with the forecast 3.6% annualised growth rate until the end of 2024 being well below the historical 12% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 11% annually. Factoring in the forecast slowdown in growth, it seems obvious that BorgWarner is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for BorgWarner. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to come to a conclusion on BorgWarner. Long-term earnings power is much more important than next year’s profits. We have forecasts for BorgWarner going out to 2026, and you can see them free on our platform here.
We don’t want to rain on the parade too much, but we did also find 1 warning sign for BorgWarner that you need to be mindful of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.