On Jan 16, 2015, we issued an updated research report on BorgWarner Inc. (BWA). This Zacks Rank #3 (Hold) stock had reported positive earnings surprises in three of the last four quarters with a positive average beat of 4.3%.
BorgWarner posted a 13% increase in adjusted earnings to 79 cents per share in the third quarter of 2014 from 70 cents in the prior-year quarter. Also, earnings per share were in line with the Zacks Consensus Estimate.
Revenues improved 13% year over year to $2.03 billion, missing the Zacks Consensus Estimate of $2.06 billion. The sales improvement was driven by global adoption of the powertrain technology and benefits from the Wahler takeover.
BorgWarner is poised to benefit from organic and inorganic expansion. However, pricing pressure from original equipment manufacturers and intensifying competition could affect the company’s results.
For 2014, BorgWarner’s organic sales are expected to increase 11.5%. Further, the company expects net earnings (excluding non-comparable items) for the year in the band of $3.23–$3.28 per share, up from $2.89 in 2013. Operating margin for 2014 is expected to be up 13% over 2013.
Net sales growth for 2015 is projected to be in the range of 2%–6%. Excluding the impact of weak foreign currency, net sales for 2015 is forecasted to grow 9.5%–12%. Also, net earnings for the year are expected to rise to $3.35–$3.55 per share. Further, net earnings (excluding the impact of weak currencies) are predicted to be in the band of $3.60–$3.75 per share, a rise of 11% to 14% compared with its 2014 net earnings guidance, excluding non-recurring items.
Key Picks from the Sector
Investors interested in the auto industry may consider better-ranked stocks like Advance Auto Parts Inc. (AAP), O'Reilly Automotive Inc. (ORLY) and Douglas Dynamics, Inc. (PLOW), all sporting a Zacks Rank #1 (Strong Buy).
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