BorgWarner Inc. (BWA) anticipates earnings growth of 23% to 27% to reach $5.35 to $5.65 per share in 2012 compared with 2011 earnings guidance of $4.35 to $4.45 per share, driven by a strong backlog of net new business.
The company predicted that the net new business, driven by strong demand for its product technologies (including gasoline and diesel turbochargers, dual-clutch transmission, engine timing systems and emissions products), will push sales to the tune of 10% to 12% in 2012 compared with 2011. Excluding the negative impact of foreign currencies, sales growth is expected to be 14% to 16% during the year.
BorgWarner stated that global light vehicle production is expected to grow by 6%, while European light vehicle production is expected to fall 4% during the year.
The company expects operating margin to go up by 11.5% or better in 2012 from 2011 levels. The improvement will be largely driven by restructuring actions initiated in 2008 and 2009, incremental income from higher sales, and cost reduction measures.
However, the positive effects will be partially offset by higher raw material costs and other inflationary pressures. The company's guidance was based on a U.S. Dollar to Euro exchange rate of $1.30 in 2012 compared with $1.40 in 2011. The company also expects capital expenditures (including tooling outlays) of $450 million to $500 million for the year to support its business growth.
In November last year, BorgWarner revealed that it expects net new powertrain business of $2.5 billion from 2012 through 2014, reflecting a 9% increase from its previous three-year net new business.
About 80% of the new business is expected 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% of the business is expected to emanate from drivetrain-related products such as the company’s fuel-efficient DualTronic transmission technology, traditional automatic transmission and all-wheel drive technologies.
The new business will involve programs with every major automaker around the world. Europe – the market leader in powertrain technology – is expected to account for 45% of the business.
Meanwhile, Asia is anticipated to account for 35%, with China (22%) being the largest player as the top 25 customers of the business will include 8 Chinese original equipment manufacturers (OEMs). The remaining 20% of the business is expected to be generated from the U.S. over three years.
BorgWarner, a Zacks#3 Rank (Hold) company, 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).
The company posted a 64% increase in profit to $1.15 per share in the third quarter of 2011 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 2010-quarter led by strong demand for the company’s products in the midst of an improving fuel economy and emission standards.
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