BorgWarner Inc. (BWA) posted a 64% increase in profit to $1.15 per share in the third quarter of the year from 70 cents per share (excluding non-recurring item) in the same quarter of 2010. The profit was higher than the Zacks Consensus Estimate of $1.05 per share.
Net sales surged 27% to $1.79 billion from $1.41 billion in the year-ago quarter led by strong demand for the company’s products, which are amenable to improved fuel economy and ensure emission standards.
Operating margin income rose to $198.8 million from $123.0 million in the third quarter of 2010. Consequently, operating margin improved to 11% from 9% in the year-ago quarter. The increase was attributable to the company’s cost management measures.
Segment Details
Sales in the Engine segment escalated 23% to $1.26 billion driven by strong growth in global sales in most of its major product groups. Adjusted earnings before interest, income taxes and non-controlling interest (adjusted EBIT) rose 38% to $188 million from $136 million in the third quarter of 2010.
Sales in the Drivetrain segment appreciated 36% to $539 million led by strong sales of four-wheel drive system and traditional transmission component in Korea, and that of dual clutch transmission module in Europe, as well as a positive impact from the acquisition of the Traction Systems division of Haldex. Adjusted EBIT went up 40% to $44 million from $31 million in the third quarter of 2010.
Financial Position
BorgWarner had cash and cash equivalents of $377.0 million as of September 30, 2011compared with $449.9 million as of December 31, 2010. Total debt at the end of the quarter increased to $1.39 billion compared with $1.18 billion as of December 31, 2010. Consequently, debt-to-capitalization ratio deteriorated to 37% from 34% as of December 31, 2010.
In the first nine months of 2011, net cash provided by operating activities improved to $473.1 million from $312.7 million in the same period of 2010, mainly driven by higher profits. Capital expenditures, including tooling outlays, increased to $274.1 million in the first nine months of 2011 from $187.8 million in the 2010-period.
Guidance
For full year 2011, BorgWarner stated its EPS guidance of $4.35 to $4.45, which is at the upper end of its previous guidance of $4.25–$4.45. The company expects revenues to grow between 26% and 27% compared with the prior guidance of 25% to 28%.
Our Take
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.
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 (VLKAY) and Ford Motor (F).
BorgWarner continues to focus on new product launches supported by new business opportunities and acquisitions. Demand for its fuel-efficient engines and transmissions has grown stronger due to more stringent government regulations.
These factors, along with commendable results and better outlook, have led the company to retain a Zacks #2 Rank, which translates into a Buy rating in the short-term (1 to 3 months). We reiterate our Outperform recommendation on the stock for the long-term (more than 6 months).
BORG WARNER INC (BWA): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment