BorgWarner Misses Estimates - Analyst Blog


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BorgWarner Inc. ( BWA ) witnessed a 28% increase in profit to $1.28 per share in the first quarter of 2012 from $1.00 per share in the same quarter of 2011. With this, the auto parts maker missed the Zacks Consensus Estimate by 2 cents per share.

Revenues in the quarter hiked 10.5% to $1.9 billion from $1.7 billion in the first quarter of 2011. It was in line with the Zacks Consensus Estimate. The impact of foreign currencies, primarily the Euro, reduced net sales by about $45 million in the quarter.

Operating income increased 26% to $225.7 million from $179.3 million in the same quarter prior year. Operating margin was 12% compared with 10% in the corresponding quarter last year.

Revenues from the Engine segment hiked 4.7% to $1.3 billion due to strong turbocharger technology adoption around the world as well as growth in sales of engine timing system and emission products. Excluding the impact of currency, revenues increased about 8% in the segment. Adjusted earnings before interest, income taxes and non-controlling interest (EBIT) increased 13% to $210 million from $186 million in the first quarter 2011.

Revenues in the Drivetrain segment escalated 26% to $611 million from $486 million in the first quarter of 2011. The increase was driven by strong all wheel drive system sales in North America and Europe, higher dual clutch transmission module sales in Europe, and improvement in traditional transmission module sales in Europe.

Excluding the impact of currency and the Traction Systems acquisition, revenues increased approximately 24% from the prior year. Adjusted EBIT was $61 million, up 91% from $32 million in the first quarter of 2011.

The company had cash amounting to $396.9 million as of March 31, 2012, a 10.4% increase from $359.6 million as of December 31, 2011. Total debt increased by $80.9 million to $1.4 billion as of March 31, 2012. Debt (net of cash) to capitalization ratio stood at 27.1% as of March 31, 2012 compared with 28.3% as of December 31, 2011.

In the quarter, the company had cash flow from operating activities of $30.8 million compared with cash outflow of $41.4 million in the prior year, mainly driven by an increase in profit. Capital expenditures, including tooling outlays, increased to $95.0 million from $70.2 million a year ago.

For 2012, BorgWarner expects sales to grow 10% to 12% compared with 2011. It forecasted earnings per share within the range of $5.35 to $5.65 for the year.

BorgWarner is a leading manufacturer of powertrain products for the world's major automakers. Its products include four-wheel-drive and all-wheel-drive transfer cases (primarily for light trucks and sport utility vehicles or SUVs), as well as automatic transmission and timing chain systems. The company's products are capable of improving vehicle performance and stability along with fuel efficiency and emission levels.

The company operates in 59 locations in 19 countries, providing products that increase fuel efficiency and reduction in emission. These products are manufactured and sold worldwide, primarily to original equipment manufacturers of passenger cars, SUVs, trucks and commercial transportation products. The company's largest customers include Volkswagen AG ( VLKAY ), Ford Motor Co. ( F ), Toyota Motor Corp. ( TM ) and Honda Motor Co. ( HMC ).

Further, demand for the company's fuel-efficient engines and transmissions have grown stronger due to more stringent government regulations. These factors, along with commendable results, have led the company to retain Zacks #1 Rank on its stock, which translates into a rating of Strong Buy for the short-term (1 to 3 months).

BORG WARNER INC ( BWA ): Free Stock Analysis Report
FORD MOTOR CO ( F ): Free Stock Analysis Report
HONDA MOTOR ( HMC ): Free Stock Analysis Report
TOYOTA MOTOR CP ( TM ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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