BorgWarner (BWA) Beats on Q2 Earnings, Buys Rhombus Energy

BorgWarner Inc.’s BWA adjusted earnings of $1.05 per share for second-quarter 2022 declined from $1.08 recorded in the prior-year quarter. The bottom line, however, beat the Zacks Consensus Estimate of 86 cents per share. Higher-than-anticipated revenues from Fuel Systems and Aftermarket segments resulted in the outperformance. The automotive equipment supplier reported net sales of $3,759 million, outpacing the Zacks Consensus Estimate of $3,690 million. The top line was at the same level with the year-ago quarter.

BorgWarner Inc. Price, Consensus and EPS Surprise

BorgWarner Inc. Price, Consensus and EPS Surprise

BorgWarner Inc. price-consensus-eps-surprise-chart | BorgWarner Inc. Quote

Segmental Performance

Air Management: Net sales totaled $1,790 million in the reported quarter compared with $1,754 million in the year-ago period. The sales figure lagged the Zacks Consensus Estimate of $1,834 million. Adjusted EBIT of $235 million declined from $263 million recorded in the year-ago quarter and also missed the consensus metric of $240 million.

e-Propulsion & Drivetrain: Sales from the segment were $1,272 million, up from $1,229 million a year ago. The sales figure, however, fell short of the Zacks Consensus Estimate of $1,329 million. The segment generated an adjusted EBIT of $80 million compared with $132 million in the corresponding period of 2021. The figure missed the consensus metric of $112 million.

Fuel Systems: Sales from the segment totaled $516 million, down from $582 million generated in the year-ago quarter. The metric, however, surpassed the consensus estimate of $463 million. The segment generated an adjusted EBIT of $44 million, down from $60 million recorded in the corresponding period of 2021. The metric, however, crossed the consensus mark of $42.82 million.

Aftermarket: Sales from the segment totaled $312 million, down from $332 million in the year-ago quarter. The figure, however, outpaced the Zacks Consensus Estimate of $213 million. The segment generated an adjusted EBIT of $51 million, up from $44 million as well as beat the consensus estimate of $22.29 million.

Financial Position

As of Jun 30, 2022, BorgWarner had $1,390 million in cash equivalents compared with $1,844 million on Dec 31, 2021. In the June quarter, long-term debt was $4,156 million, down from $4,261 million recorded on Dec 31, 2021.

Net cash provided by operating activities was $216 million in the quarter under review. Capital expenditure and FCF totaled $154 million and $62 million, respectively.

2022 Projections

For full-year 2022, the company anticipates net sales within $15.5-$16 billion, indicating an increase from $14.8 billion generated in 2021.Importantly, BorgWarner envisions electric vehicle revenues of more than $850 million for 2022, more than doubling from 2021 levels. Adjusted operating margin is expected in the band of 9.8-10.2%. Adjusted net earnings are estimated to be within $4-$4.40 per share. Free cash flow is projected in the band of $650-$750 million.

Key Developments

Along with its earnings release, BorgWarner announced that it clinched a contract with a European commercial vehicle OEM for its battery management system technology.

It has also been selected for two high-voltage coolant heater programs— one with a global OEM (expected to launch in 2023) and the other with an electric vehicle brand in China (expected to launch in 2024).

BWA also announced the buyout of Rhombus Energy Solutions, which is a provider of charging solutions in North America. The $185 million deal complements BorgWarner’s existing European charging footprint and expands the firm’s portfolio in North America.

On account of its new businesses announced to date, BorgWarner believes it is on track to achieve more than $3.7 billion of electric vehicle revenues by 2025. BWA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Here are the key takeaways from earnings releases of BWA peers including Autoliv ALV, Oshkosh Corporation OSK and Magna International MGA.

Autoliv reported second-quarter 2022 adjusted earnings of 90 cents per share, topping the Zacks Consensus Estimate of 46 cents. The bottom line, however, fell 25% on a yearly basis. The company reported net sales of $2,081 million in the quarter, which missed the Zacks Consensus Estimate of $2,180 million. The top line, however, inched up 2.9% year over year.

ALV currently carries a Zacks Rank #3.

Oshkosh reported second-quarter 2022 second-quarter adjusted earnings of 41 cents per share, missing the Zacks Consensus Estimate of 93 cents. The bottom line also plunged from $2.09 recorded in the year-ago period. In the quarter under review, consolidated net sales declined 6.4% year over year to $2,066 million. The top line also lagged the Zacks Consensus Estimate of $2,220 million. Our estimate for the top line was $2,196.6 million.

OSK currently carries a Zacks Rank #5 (Strong Sell).

Magna reported second-quarter 2022 adjusted earnings of 83 cents per share, which declined 41% on a year-over-year basis. The bottom line also lagged the Zacks Consensus Estimate of 93 cents a share. In the reported quarter, net sales increased 4% from the prior-year quarter to $9,362 million and surpassed the consensus mark of $8,655 million.

MGA currently carries a Zacks Rank #3.

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