Back to top

Analyst Blog

BorgWarner Inc. ((BWA - Analyst Report)) announced that it expects net new powertrain business of $2.5 billion from 2012 through 2014, reflecting a 9% increase from its previous three-year net new business. The new business is expected to generate from strong demand for the company’s environment-friendly technologies, including gasoline and diesel turbochargers, dual-clutch transmission, engine timing systems and emissions products.

About 80% of the new business is expected to come from engine-related products including turbochargers, ignition systems, emissions products, engine timing systems, variable cam timing modules and thermal systems. The remaining 20% of the business is expected to emanate from drivetrain-related products such as the company’s fuel-efficient DualTronic transmission technology, traditional automatic transmission and all-wheel drive technologies.

The new business will involve programs with every major automaker around the world. Being the market leader in new powertrain technology, Europe is expected to account for 45% of the business.

Meanwhile, Asia is anticipated to account for 35%, with China (22%) being the largest player as the top 25 customers of the business will include eight Chinese domestic original equipment manufacturers (OEMs). The remaining 20% of the business is expected to come from the U.S. over three years.

Tightening emissions standards and a heightened focus on fuel economy in the commercial vehicle market are expected to help BorgWarner win new businesses. The top twenty-five customers of its new business include six commercial vehicle OEMs and 18% is related to the commercial vehicle market.

Considering the company’s technology products, turbochargers are expected to account for 50% of the company’s new business. The number of turbochargers in the market is expected to grow 50% from nearly 29 million units presently to over 43 million units by 2016.

Meanwhile, dual-clutch technology is anticipated to account for 7% of the new business. The dual-clutch transmissions market is expected to increase three-fold to 8 million units by 2016.

BorgWarner, a Zacks #2 Rank company, is a leading manufacturer of powertrain products for the world’s major automakers. Its products include four-wheel-drive and all-wheel-drive transfer cases (primarily for light trucks and sport utility vehicles or SUVs), as well as automatic transmission and timing chain systems.

These products are manufactured and sold worldwide, primarily to original equipment manufacturers of passenger cars, SUVs, trucks and commercial transportation products. The company’s largest customers include Volkswagen ((VLKAY - Snapshot Report)) and Ford Motor ((F - Analyst Report)).

The company posted a 64% increase in profit to $1.15 per share in the third quarter of the year from 70 cents (excluding non-recurring item) in the same quarter of 2010. The profit was higher than the Zacks Consensus Estimate of $1.05.

Net sales surged 27% to $1.79 billion from $1.41 billion in the year-ago quarter led by strong demand for the company’s products driven by improved fuel economy and emission standards.

For full year 2011, BorgWarner stated its EPS guidance of $4.35 to $4.45, which is at the upper end of its previous guidance of $4.25–$4.45. The company expects revenues to grow between 26% and 27%, compared with the prior guidance of 25% to 28%.