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BorgWarner (BWA) Beats on Q3 Earnings, Revises 2016 View
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BorgWarner Inc. (BWA - Free Report) reported adjusted earnings of 78 cents per share in the third quarter of 2016, marginally beating the Zacks Consensus Estimate of 77 cents. Adjusted earnings increased from 73 cents per share reported in the year-ago quarter. Including the impact of non-comparable items, BorgWarner recorded earnings of $83 million or 39 cents per share in third-quarter 2016, down from $157 million or 70 cents per share reported a year ago.
Revenues increased 17.5% year over year to $2.21 billion, surpassing the Zacks Consensus Estimate of $2.19 billion. Excluding the impact of foreign currencies and the Remy International acquisition, net revenues went up 6.1% year over year.
Operating income declined to $150.3 million from $237.1 million in the third quarter of 2015. Adjusted operating income came in at $265 million, or 12.0% of net sales.
Revenues in the Engine segment improved 3.8% year over year to $1.36 billion. Excluding the impact of foreign currencies, net sales went up 3.8% in the segment.
Adjusted earnings before interest, income taxes and non-controlling interest (adjusted EBIT) improved to $218.2 million in the reported quarter from $211.9 million a year ago.
Revenues in the Drivetrain segment surged 48.3% to $866 million. Excluding the impact of foreign currencies and the Remy International acquisition, net sales rose 11.4% year over year. Adjusted EBIT improved to $86.9 million from $70.3 million in the third quarter of 2015.
BorgWarner had $518.7 million in cash as of Sep 30, 2016, compared with $577.7 million as of Dec 31, 2015. Total debt, including notes payable, was $2.62 billion as of Sep 30, 2016, compared with $2.55 billion as of Dec 31, 2015.
In the first nine months of 2016, net cash from operating activities increased to $593 million from $470 million in the year-ago period. Capital expenditures, including tooling outlays, fell to $355 million from $419 million in the first nine months of 2015.
Outlook
Net sales growth for fourth-quarter 2016 is projected in the range of 14.3%–17.8%. Excluding the impact of foreign currencies and the Remy International buyout, the year-over-year increase in net sales for the fourth quarter is estimated in the range of 3%–5%.
Net earnings for the fourth quarter are projected in the band of 82–86 cents per share. The Remy International acquisition is expected to have a positive impact of 2 cents per share.
Operating margin, excluding the impact of non-comparable items, is anticipated to be above 12% in fourth-quarter 2016. Excluding the impact of the Remy International buyout, operating margin is estimated to be above 13%.
Net sales for 2016 are projected to grow 15.2%–16.0%, compared to the prior range of 13.5%–17.5%. Excluding the impact of foreign currencies and the Remy International acquisition, net sales are expected to increase around 4.3%–4.8%.
Further, BorgWarner expects net earnings in the range of $3.24–$3.28 per share in 2016, compared to the prior range of $3.16–$3.32. 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 #4 (Sell). Some better-ranked stocks in the auto space include The Goodyear Tire & Rubber Company (GT - Free Report) , Tata Motors Limited and Standard Motor Products Inc. (SMP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Goodyear has seen its earnings estimates move north over the last 60 days.
Tata Motors has a long-term expected growth rate of 3.60%.
Standard Motor has a long-term expected growth rate of 15%.
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BorgWarner (BWA) Beats on Q3 Earnings, Revises 2016 View
BorgWarner Inc. (BWA - Free Report) reported adjusted earnings of 78 cents per share in the third quarter of 2016, marginally beating the Zacks Consensus Estimate of 77 cents. Adjusted earnings increased from 73 cents per share reported in the year-ago quarter. Including the impact of non-comparable items, BorgWarner recorded earnings of $83 million or 39 cents per share in third-quarter 2016, down from $157 million or 70 cents per share reported a year ago.
Revenues increased 17.5% year over year to $2.21 billion, surpassing the Zacks Consensus Estimate of $2.19 billion. Excluding the impact of foreign currencies and the Remy International acquisition, net revenues went up 6.1% year over year.
Operating income declined to $150.3 million from $237.1 million in the third quarter of 2015. Adjusted operating income came in at $265 million, or 12.0% of net sales.
Segment Details
Revenues in the Engine segment improved 3.8% year over year to $1.36 billion. Excluding the impact of foreign currencies, net sales went up 3.8% in the segment.
Adjusted earnings before interest, income taxes and non-controlling interest (adjusted EBIT) improved to $218.2 million in the reported quarter from $211.9 million a year ago.
Revenues in the Drivetrain segment surged 48.3% to $866 million. Excluding the impact of foreign currencies and the Remy International acquisition, net sales rose 11.4% year over year. Adjusted EBIT improved to $86.9 million from $70.3 million in the third quarter of 2015.
BORG WARNER INC Price, Consensus and EPS Surprise
BORG WARNER INC Price, Consensus and EPS Surprise | BORG WARNER INC Quote
Financial Position
BorgWarner had $518.7 million in cash as of Sep 30, 2016, compared with $577.7 million as of Dec 31, 2015. Total debt, including notes payable, was $2.62 billion as of Sep 30, 2016, compared with $2.55 billion as of Dec 31, 2015.
In the first nine months of 2016, net cash from operating activities increased to $593 million from $470 million in the year-ago period. Capital expenditures, including tooling outlays, fell to $355 million from $419 million in the first nine months of 2015.
Outlook
Net sales growth for fourth-quarter 2016 is projected in the range of 14.3%–17.8%. Excluding the impact of foreign currencies and the Remy International buyout, the year-over-year increase in net sales for the fourth quarter is estimated in the range of 3%–5%.
Net earnings for the fourth quarter are projected in the band of 82–86 cents per share. The Remy International acquisition is expected to have a positive impact of 2 cents per share.
Operating margin, excluding the impact of non-comparable items, is anticipated to be above 12% in fourth-quarter 2016. Excluding the impact of the Remy International buyout, operating margin is estimated to be above 13%.
Net sales for 2016 are projected to grow 15.2%–16.0%, compared to the prior range of 13.5%–17.5%. Excluding the impact of foreign currencies and the Remy International acquisition, net sales are expected to increase around 4.3%–4.8%.
Further, BorgWarner expects net earnings in the range of $3.24–$3.28 per share in 2016, compared to the prior range of $3.16–$3.32. 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 #4 (Sell). Some better-ranked stocks in the auto space include The Goodyear Tire & Rubber Company (GT - Free Report) , Tata Motors Limited and Standard Motor Products Inc. (SMP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Goodyear has seen its earnings estimates move north over the last 60 days.
Tata Motors has a long-term expected growth rate of 3.60%.
Standard Motor has a long-term expected growth rate of 15%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>