On Mar 25, we upgraded
) to Neutral based on its advances in technologies and promising
sales guidance. However, we are disappointed about its lower
quarterly profits and concerned about the pricing pressure from
OEMs and strong competition.
Why the Upgrade?
On Feb 14, BorgWarner posted a 2.5% decrease in profits to $1.16
per share (excluding non-recurring items) in the fourth quarter
of 2012 from $1.19 in the same quarter of 2011. However, EPS in
the quarter surpassed the Zacks Consensus Estimate by 4 cents.
Revenues dipped 3.1% to $1.72 billion, but were ahead of the
Zacks Consensus Estimate of $1.69 billion.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for 2013 increased 0.8% to $5.31 per share.
Meanwhile, the Zacks Consensus Estimate for 2014 increased 0.6%
to $6.32 per share. Currently, BorgWarner maintains a Zacks Rank
BorgWarner expects annual sales to rise 2% to 6% in 2013 compared
with 2012. Excluding the impact of 2012 dispositions, net sales
are expected to improve 3% to 7%.
BorgWarner's advanced design and fuel efficient technologies will
boost its results. The company expects 80% of its business to
come from engine-related products including turbochargers,
ignition systems, emissions products, engine timing systems,
variable cam timing modules and thermal systems. The remaining
20% will be generated from drivetrain-related products including
the fuel-efficient DualTronic transmission technology,
traditional automatic transmission and all-wheel drive
However, we are worried about the strong competition faced by
BorgWarner as the path-breaking technologies are developed by its
peers, which could reduce demand for its products. In addition,
BorgWarner faces continuous pricing pressure from OEMs to reduce
raw material costs.
Other Stocks to Look For
Few stocks that are performing well in the industry where
BorgWarner operates include
STRATTEC Security Corporation
). All these companies carry a Zacks Rank #1 (Strong Buy).
BORG WARNER INC (BWA): Free Stock Analysis
DENSO CORP (DNZOY): Get Free Report
STRATTEC SEC CP (STRT): Free Stock Analysis
GENTHERM INC (THRM): Free Stock Analysis
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