Investors in BorgWarner Inc. (NYSE:BWA) had a good week, as its shares rose 5.7% to close at US$34.03 following the release of its quarterly results. It looks to have been a decent result overall – while revenue fell marginally short of analyst estimates at US$3.6b, statutory earnings beat expectations by a notable 44%, coming in at US$1.34 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. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
See our latest analysis for BorgWarner
Following last week’s earnings report, BorgWarner’s 18 analysts are forecasting 2024 revenues to be US$14.4b, approximately in line with the last 12 months. Statutory earnings per share are predicted to soar 21% to US$4.05. Before this earnings report, the analysts had been forecasting revenues of US$14.7b and earnings per share (EPS) of US$3.75 in 2024. So it’s pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company’s earnings power.
There’s been no real change to the average price target of US$41.26, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company’s valuation over a longer timeframe. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on BorgWarner, with the most bullish analyst valuing it at US$50.00 and the most bearish at US$36.00 per share. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It’s pretty clear that there is an expectation that BorgWarner’s revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 1.2% growth on an annualised basis. This is compared to a historical growth rate of 9.9% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 10% 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 takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around BorgWarner’s earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at US$41.26, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for BorgWarner going out to 2026, and you can see them free on our platform here..
It might also be worth considering whether BorgWarner’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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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.
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