BorgWarner Inc. (BWA - Analyst Report) witnessed a 34% increase in profit to $1.19 per share (excluding special items of 19 cents per share) in the fourth quarter of 2011 from 89 cents per share in the same quarter of 2010. With this, the auto parts maker surpassed the Zacks Consensus Estimate by 3 cents per share.
Revenues in the quarter went up 16% to $1.7 billion. The impact of foreign currencies, primarily the Euro, reduced net sales by about $6 million in the quarter.
Operating income was 10.8% compared with 10.3% in the fourth quarter of 2011. Excluding special items, operating margin was 12.0% during the reported quarter.
Revenues in the Engine segment rose 11% to $1.3 billion in the quarter driven by strong turbocharger, engine timing system and fan and fan drive sales around the world. Excluding the impact of currency, revenues increased about 12%. Adjusted earnings before interest, income taxes and non-controlling interest (EBIT) increased 25% to $203 million in the quarter from $162 million in fourth quarter 2010.
Revenues in the Drivetrain segment escalated 27% to $534 million in the quarter, driven by strong traditional transmission component sales in Korea, higher dual clutch transmission module sales in Europe, and the positive impact from the acquisition of the Traction Systems division of Haldex. Excluding the impact of currency and the Traction Systems acquisition, revenues increased approximately 14%. Adjusted EBIT was $47 million, up 47% from $32 million in the fourth quarter of 2010.
For full year 2011, BorgWarner posted a whopping 47% rise in profit to $4.45 per share from $3.02 per share (excluding special items of 5 cents per share) in 2010. Revenues increased 26% to $7.1 billion from the prior year.
BorgWarner had cash amounting to $359.6 million as of December 31, 2011, a decrease from $449.9 million as of December 31, 2010. Total debt increased by $148.7 million to $1.3 billion as of December 31, 2011 from $1.2 billion as of December 31, 2010 due to the acquisition of the Traction Systems division of Haldex and share repurchases. Debt (net of cash) to capitalization ratio stood at 28.3% as of December 31, 2011 compared with 24.0% as of December 31, 2010.
In 2011, cash flow from operating activities rose to $708.2 million from $538.9 million in the prior year, mainly driven by an increase in profit. Capital expenditures, including tooling outlays, increased to $393.7 million from $276.6 million a year ago.
For 2012, BorgWarner expects its sales to grow 10% to 12% compared with 2011, earnings per share of $5.35 to $5.65 and an operating income margin of 11.5% or higher.
BorgWarner 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) and Ford Motor (F - Analyst Report).
BorgWarner continues to focus on new product launches supported by new business opportunities and acquisitions. Demand for its fuel-efficient engines and transmissions have grown stronger due to more stringent government regulations.
These factors, along with commendable results and better outlook, have led the company to retain Zacks #2 Rank on its stock, which translates to a “Buy” rating for the short-term (1 to 3 months).