BorgWarner Demand, Costs Up

BorgWarner, Inc. (BWA) is expected to benefit from the growing demand for its strong technology-based product portfolio. About $1.95 billion of new powertrain business is expected between 2008 and 2010. The company expects a 500% increase in demand for its DualTronic transmission modules by 2013.

Moreover, the company has healthy financials with low debt and has taken further initiatives to maintain margins in the challenging North American industry environment. However, due to high raw material costs and price concessions to automotive makers, we rate the shares a Hold, with a target of $40, which is derived from our 2008 EPS estimate, and a forward multiple of 13.7x.

On September 3, BorgWarner announced that it will supply Cam Torque Actuated (CTA) variable cam timing technology for the upgraded Duratec 3.0-liter V-6 engine, debuting in the 2009 Ford Escape. CTA a patented technology of BorgWarner improves engine performance and fuel the economy while reducing emissions. Earlier, on August 6, BorgWarner received a 2008 Global Innovation Award from Nissan for its innovative DCT technology, used in the all-new 2008 Nissan GT-R, launched in December 2007 in Japan and in July 2008 in the U.S.

New products that enable diesel engines to have improved cold-starting capability are likely to increase sales in the future as well. Electronic tire pressure sensors (in which the company ranks number two worldwide), a new safety device, is also likely to be popular. Environmental trends will also spur growth. Diesel cold start technology reduces emissions by at least 20%. Secondary air pumps reduce air emissions by 40%. Exhaust gas recirculation reduces nitrogen oxide (NOX) emissions by up to 80%.

Read the full analyst report on BWA

Read the full analyst report on BWA