We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
BorgWarner (BWA) to Spin Off Fuel Systems & Aftermarket Units
Read MoreHide Full Article
BorgWarner (BWA - Free Report) recently announced that it plans to execute a tax-free spin-off of its Fuel Systems and Aftermarket segments into a separate, publicly traded company known as NewCo.
Upon completing the proposed separation, BorgWarner would consist of the company’s current e-Propulsion & Drivetrain and Air Management segments. The company believes it to be positioned as a market leader in EV propulsion with a focus on developing and commercializing EV technologies, poised for long-term growth opportunities. At the same time, it hopes to deliver top-quartile margins and strong cash generation.
In such light, it expects that the separation would better allow BorgWarner to focus on its set goals underlined in its Charging Forward strategy. The company has estimated that after giving effect to the intended transaction, it is already on track with its organic bookings and acquisitions to date to deliver more than 22% of its revenues from EVs by 2025. This is less than two years into the execution of its five-year strategy.
With its electrification growth initiatives, the company believes it is on track to achieve or exceed its target of 25% of revenues from EVs by 2025. BorgWarner’s ambitious Charging Forward project, announced last year to accelerate its electrification strategy, bodes well. As the world is witnessing unprecedented EV growth, the OEM player’s hybrid and electric technologies are expected to be major revenue drivers.
The intended separation will optimize BWA’s combustion portfolio while NewCo will pursue growth opportunities in alternative fuels, such as hydrogen and Aftermarket.
Following the separation, NewCo would consist of the company’s current Fuel Systems and Aftermarket segments. NewCo is expected to benefit from its relationships with global OEMs and focus on the global vehicle parc, which would be majorly combustion-based through 2040. It also plans to capture the growth trends in Gasoline Direct Injection and Hydrogen Injection Systems.
The current Fuel Systems and Aftermarket segments have witnessed significant operational and segment margin improvement over the last couple of years. It is anticipated that NewCo will maintain its strong, double-digit operating margin profile to deliver solid free cash flow. Moreover, it is expected that NewCo would have moderate leverage and solid liquidity to support its current business operations and long-term strategies to generate more shareholder value.
Immediately upon completion of the transaction, BorgWarner’s shareholders will own shares of both companies. The transaction is expected to be completed in late 2023, subject to the satisfaction of customary conditions, required consent and other regulatory approvals. However, there is no assurance regarding the ultimate timing of the intended transaction or its completion.
Shares of BWA have lost 10% over a year compared with the industry’s 35.4% decline.
CarParts has an expected earnings growth rate of 85% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 72.7% upward over the past 30 days.
Allison has an expected earnings growth rate of 26.1% for the current year. The Zacks Consensus Estimate for ALSN’s current-year earnings has remained constant in the past 30 days.
Genuine Parts has an expected earnings growth rate of 18.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
BorgWarner (BWA) to Spin Off Fuel Systems & Aftermarket Units
BorgWarner (BWA - Free Report) recently announced that it plans to execute a tax-free spin-off of its Fuel Systems and Aftermarket segments into a separate, publicly traded company known as NewCo.
Upon completing the proposed separation, BorgWarner would consist of the company’s current e-Propulsion & Drivetrain and Air Management segments. The company believes it to be positioned as a market leader in EV propulsion with a focus on developing and commercializing EV technologies, poised for long-term growth opportunities. At the same time, it hopes to deliver top-quartile margins and strong cash generation.
In such light, it expects that the separation would better allow BorgWarner to focus on its set goals underlined in its Charging Forward strategy. The company has estimated that after giving effect to the intended transaction, it is already on track with its organic bookings and acquisitions to date to deliver more than 22% of its revenues from EVs by 2025. This is less than two years into the execution of its five-year strategy.
With its electrification growth initiatives, the company believes it is on track to achieve or exceed its target of 25% of revenues from EVs by 2025. BorgWarner’s ambitious Charging Forward project, announced last year to accelerate its electrification strategy, bodes well. As the world is witnessing unprecedented EV growth, the OEM player’s hybrid and electric technologies are expected to be major revenue drivers.
The intended separation will optimize BWA’s combustion portfolio while NewCo will pursue growth opportunities in alternative fuels, such as hydrogen and Aftermarket.
Following the separation, NewCo would consist of the company’s current Fuel Systems and Aftermarket segments. NewCo is expected to benefit from its relationships with global OEMs and focus on the global vehicle parc, which would be majorly combustion-based through 2040. It also plans to capture the growth trends in Gasoline Direct Injection and Hydrogen Injection Systems.
The current Fuel Systems and Aftermarket segments have witnessed significant operational and segment margin improvement over the last couple of years. It is anticipated that NewCo will maintain its strong, double-digit operating margin profile to deliver solid free cash flow. Moreover, it is expected that NewCo would have moderate leverage and solid liquidity to support its current business operations and long-term strategies to generate more shareholder value.
Immediately upon completion of the transaction, BorgWarner’s shareholders will own shares of both companies. The transaction is expected to be completed in late 2023, subject to the satisfaction of customary conditions, required consent and other regulatory approvals. However, there is no assurance regarding the ultimate timing of the intended transaction or its completion.
Shares of BWA have lost 10% over a year compared with the industry’s 35.4% decline.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
BWA currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked players in the auto space – CarParts.com (PRTS - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Allison Transmission Holdings (ALSN - Free Report) and Genuine Parts Company (GPC - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 stocks here.
CarParts has an expected earnings growth rate of 85% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 72.7% upward over the past 30 days.
Allison has an expected earnings growth rate of 26.1% for the current year. The Zacks Consensus Estimate for ALSN’s current-year earnings has remained constant in the past 30 days.
Genuine Parts has an expected earnings growth rate of 18.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.