Top Performer for Thurs: BorgWarner (BWA)

It's great that BorgWarner Inc. (BWA - Analyst Report) easily surpassed profit expectations in the first quarter, but the main reason for this auto parts manufacturer's double-digit gain today is probably the magnitude of its 2010 guidance revision.

The company didn't just raise its expectations by a few cents; it dug in and lifted the outlook by approximately 50%. The company now expects earnings per share between $2.20 and $2.50 per share, instead of the previous outlook of $1.40 to $1.70. That puts the guidance well above the Zacks Consensus Estimate.

Furthermore, the company expects revenue growth between 28% and 32% from 2009. Previously, it had expected growth of 15% to 19%.

BWA believes that the strong production levels in the first quarter were based on fundamental improvements in the market. Specifically, the company stated that the pace of recovery in North American production volumes continues to improve, while Europe is showing signs of a shift toward vehicles with higher BWA content. And, of course, sales growth in Asia continues to gain momentum and actually doubled from last year.

With a gain of more than 10% so far today, BorgWarner is not only a Zacks #1 Rank Top Performer, but it is THE top performer. It has easily ahead of any other stock on the Zacks #1 Rank List, blowing the doors off the second-place gain of around 7.7%.

Volume is north of 3.7 million shares, compared to the daily average of about 1.6 million.

First Quarter Beats Easily

The first quarter saw BorgWarner earn 65 cents per share, excluding items, which returned the company to profitability following a loss of 12 cents a year earlier. The result bettered the Zacks Consensus Estimate of 42 cents by more than 50%. This was the company's third straight positive earnings surprise.

Sales jumped 57% year over year to nearly 1.3 billion, driven by growing demand for its technology across the globe and improved volumes in its base business.

Earnings Estimates for BorgWarner

BorgWarner got 1 upward revision for each this year and next in the past 7 days, and that was actually enough to enhance the Zacks Consensus Estimates for those periods. For 2010, the company is expected to earn $1.77 per share, which is up 1.7% from last week's $1.74. Furthermore, that guidance is up nearly 10% in 3 months.

The Zacks Consensus Estimate for next year is up 1.8% in a week and is currently $2.84 per share, which suggests year-over-year growth of 60%.

There are currently 15 total estimates for each period, which suggests the potential for further upside given the enhanced outlook for 2010.

More About BorgWarner

BorgWarner is a product leader in highly-engineered components and systems for vehicle powertrain applications worldwide.

It is part of the auto/truck – orig industry. There are 5 other names from this space on Thursday's Zacks #1 Rank List, including American Axle & Manufacturing Holdings, Inc. (AXL - Analyst Report), Autoliv, Inc. (ALV - Analyst Report), Oshkosh Corporation (OSK - Snapshot Report), Strattec Security Corporation (STRT - Snapshot Report) and WABCO Holdings Inc. (WBC - Snapshot Report).

We currently have a longer-term Neutral recommendation on the company. We like that it focused on new product launches, and that demand for its fuel-efficient engines and transmissions has been strong due to government regulations. At the same time though, the company is experiencing strong competition and continued pricing pressure from original equipment manufacturers.

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