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BorgWarner (BWA) Beats on Q1 Earnings, Revises '16 View

BorgWarner Inc. BWA reported adjusted earnings of 80 cents per share in the first quarter of 2016, 2.6% higher than 78 cents recorded in the year-ago quarter. Earnings per share also marginally surpassed the Zacks Consensus Estimate of 79 cents.

Including the impact of non-comparable items, BorgWarner recorded earnings of $173.2 million or 75 cents per share in first-quarter 2016, down from $187.7 million or 79 cents per share a year ago.

Revenues increased 14.3% year over year to $2.27 billion and outpaced the Zacks Consensus Estimate of $2.25 billion. Excluding the impact of foreign currencies and the Remy International acquisition, revenues went up 4.5% year over year.

Operating income increased to $264.2 million from $259.6 million in the first quarter of 2015. Adjusted operating income came in at $276 million, or 12.2% of net sales.

Segment Details

Revenues in the Engine segment inched up 1.3% year over year to $1.4 billion. Excluding the impact of foreign currencies, net sales went up 4.5% in the segment.

Adjusted earnings before interest, income taxes and non-controlling interest (adjusted EBIT) improved to $233.4 million in the reported quarter from $230.4 million a year ago.

Revenues in the Drivetrain segment surged 43.9% to $879 million. Excluding the impact of foreign currencies and the Remy International acquisition, net sales rose 4.8% year over year. Adjusted EBIT improved to $83.8 million from $71 million in the first quarter of 2015.

Financial Position

BorgWarner had $392.3 million in cash as of Mar 31, 2016, compared with $577.7 million as of Dec 31, 2015. Total debt, including notes payable, was $2.59 billion as of Mar 31, 2016, compared with $2.55 billion as of Dec 31, 2015.

In first-quarter 2016, net cash from operating activities increased to $34.4 million from $32.7 million in the year-ago period. Capital expenditures, including tooling outlays, went down to $104.3 million from $140 million in the first quarter of 2015.

Outlook

Net sales growth for second-quarter 2016 is projected in the range of 10.6%–16%. Excluding the impact of foreign currencies and the Remy International buyout, the year-over-year change in net sales for the second quarter is estimated in the range of 1.5%–4.8%.

Net earnings for the second quarter are projected in the band of 78–83 cents per share. The Remy International acquisition is expected to have a positive impact of 3 cents per share.

Operating income, as a percentage of net sales, is anticipated to be more than 12% in second-quarter 2016. Excluding the impact of the Remy International buyout, operating margin is estimated to be over 13%.

Net sales for 2016 are projected to grow 12.7%–17.5% compared to the previous expectation of 13.2%–18.3% improvement. Excluding the impact of foreign currencies and the Remy International acquisition, net sales are expected to increase around 2.5%–5.5%.

Further, BorgWarner expects net earnings in the range of $3.11–$3.32 per share in 2016. The Remy International acquisition is likely to have a positive impact of 12 cents per share.

Operating margin for 2016, excluding the impact of non-comparable items, is estimated to be over 12%. Excluding the impact of the Remy International acquisition, operating margin is expected to be higher than 13%.       

Zacks Rank

BorgWarner currently carries a Zacks Rank #2 (Buy).

Some other favorably ranked automobile stocks include Lear Corp. LEA, Federal-Mogul Holdings Corp. FDML and Superior Industries International, Inc. SUP. All three stocks sport a Zacks Rank #1 (Strong Buy).

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BORG WARNER INC (BWA): Free Stock Analysis Report
 
SUPERIOR INDS (SUP): Free Stock Analysis Report
 
LEAR CORPORATN (LEA): Free Stock Analysis Report
 
FEDERAL MOGUL-A (FDML): Free Stock Analysis Report
 
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