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BorgWarner Strong in North America Market, Costs on the Rise

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On Nov 12, we issued an updated research report on BorgWarner Inc. (BWA - Free Report) .

This worldwide provider of clean and efficient technology solutions for vehicles reported third-quarter 2018 earnings on Oct 25, 2018. Strong sales growth in the North American market, along with increased revenue generation from commercial vehicle and off-road products, drove the company’s financials.

During the reported quarter, the company witnessed a year-over-year increase in adjusted earnings and revenues. Moreover, both earnings and revenues beat the respective Zacks Consensus Estimate. Further, BorgWarner reaffirmed its organic growth rate outlook for 2018. Net sales are projected to be $10.49-$10.58 billion while net earnings are expected to be $4.35-$4.40.

BorgWarner Inc. Price and Consensus

 

With an eye for long-term growth, the company is launching innovative products, majorly focusing on hybrid and electric technologies. Beside this, it is also entering numerous collaborations to develop products for combustion, hybrid and electric vehicles.

In September 2018, the company entered a three-year agreement with auto manufacturer WM Motor based in China. Per the agreement, the companies will set up transportation model for smart city in China. Under the collaboration, BorgWarner will provide its range of propulsion technologies and efficient electrical application systems.

Further, the company opened a plant in China that was created to remain at par with the Country’s rising demand for EVs and hybrid electric vehicles.

Despite such growth initiatives, BorgWarner has a few concerns for the near term. Of late, the demand for light vehicles has declined, which is expected to continue in the coming quarters as well. This is majorly due to the decline in production of such vehicles in China and Europe. Additionally, rise in raw material and tariff-related costs, and inflation are impacting the company’s margin.

Price Performance

In the past three months, BorgWarner’s stock has lost 14.4%, outperforming 19.4% increase recorded by the industry it belongs to.

 



Zacks Rank & Key Picks

BorgWarner currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space include General Motors Company (GM - Free Report) and O’Reilly Automotive, Inc. (ORLY - Free Report) , with a Zacks Rank #2 (Buy), and Tesla, Inc. (TSLA - Free Report) with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

General Motors has an expected long-term growth rate of 8.5%. Shares of the company have increased 11.1% over the past month.

O’Reilly has an expected long-term growth rate of 15.7%. Over the past three months, shares of the company have gained 8.1%.

Tesla has an expected long-term growth rate of 10%. Shares of the company have rallied 27.6% over the past month.

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