BorgWarner (BWA) Q1 Earnings Surpass Estimates, Down Y/Y

BorgWarner Inc. (NYSE:BWA) has delivered adjusted earnings of $1 per share in first-quarter 2019, beating the Zacks Consensus Estimate of 94 cents. However, the figure decreased from $1.10 per share recorded in the year-ago quarter. Net income was $160 million compared with $225 million in the prior-year quarter.

BorgWarner’s net sales declined 7.8% year over year to $2.57 billion, beating the Zacks Consensus Estimate of $2.47 billion. Net sales decreased roughly $127 million, owing to foreign currency fluctuations.

In the reported quarter, operating income amounted to $264 million compared with the prior-year figure of $333 million.

Segment Details

Net sales from the Engine segment decreased to $1.6 billion from $1.71 billion in the prior-year quarter. Excluding impacts of foreign currencies, the segment’s net sales edged down 1.8% year over year and adjusted EBIT (earnings before interest, income taxes and non-controlling interest) declined 10% to $252 million.

At the Drivetrain segment, net sales decreased to $982 million in first-quarter 2019 from $1.08 billion in the prior-year quarter. Excluding impacts of foreign currencies, net sales declined 5.64% on a year-over-year basis and adjusted EBIT decreased 9.9% to $109 million.

Financial Position

As of Mar 31, 2019, BorgWarner had $494 million in cash compared with $739 million as of Dec 31, 2018. Long-term debt was $1.92 billion, decreasing from $1.94 billion recorded at the end of 2018.

Net cash provided by operating activities was $40 million at the end of 2019 compared with $35 million in the prior year. During the reported quarter, capital expenditure, including tooling outlays, decreased to $117 million from $160 million in first-quarter 2018.

Outlook

For second-quarter 2019, the company’s net organic sales are likely to be down 2.5% to flat from net sales of $2.69 billion in the year-ago quarter. Further, it envisions net earnings between 99 cents and $1.05 per share.

For 2019, BorgWarner reaffirmed its guidance. It anticipates net sales of $9.90-$10.37 billion and net earnings of $4-$4.25 per share. Further, operating margin is expected to be 11.9-12.2%.

Zacks Rank & Stocks to Consider

BorgWarner currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are Geely Automobile Holdings Ltd. (OTC:GELYY) , PACCAR Inc. (NASDAQ:PCAR) and Fox Factory Holding Corp. (NASDAQ:FOXF) . While Geely currently sports a Zacks Rank #1 (Strong Buy), PACCAR and Fox Factory carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Geely’ long-term growth rate is projected at 7%. Over the past three months, shares of the company have gained 28.5%.

PACCAR has an expected long-term growth rate of 8.4%. Shares of the company have gained 16.6% over the past three months.

Fox Factory has an expected long-term growth rate of 15.1%. Shares of the company have gained 29.5% over the past three months.

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