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Why Is BorgWarner (BWA) Up 4% Since Last Earnings Report?

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It has been about a month since the last earnings report for BorgWarner (BWA - Free Report) . Shares have added about 4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is BorgWarner due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

BorgWarner's Q1 Earnings & Sales Beat Estimates

BorgWarner  reported adjusted earnings of $1.21 per share in first-quarter 2021, beating the Zacks Consensus Estimate of 92 cents. Higher-than-anticipated contributions from the Air Management and e-Propulsion & Drivetrain segments resulted in this outperformance.

Moreover, the bottom line compares favorably with the year-ago quarter’s profit of 77 cents per share.

This automotive equipment supplier reported net sales of $4,009 million, outpacing the Zacks Consensus Estimate of $3,587 million. Moreover, the top-line figure comes in a whopping 76% higher than the year-ago quarter’s $2,279 million.

Segmental Performance

Air Management: Net sales totaled $2,011 million for the reported quarter compared with the $1,434 million registered during the first quarter 2020. The sales figure also topped the Zacks Consensus Estimate of $1,716 million. Excluding the impact of foreign-currency translations but including the estimated growth in Delphi Technologies-related revenues, sales from the segment went up 14% year over year. Adjusted EBIT of $322 million compares favorably with the year-ago period’s $208 million. The reported EBIT also surpassed the consensus mark of $233 million.

e-Propulsion & Drivetrain: Sales from the segment came in at $1,466 million compared with the $860 million seen during the first quarter 2020. The sales figure also exceeded the Zacks Consensus Estimate of $1,209 million. Excluding the impact of foreign currency translations but including the estimated growth in Delphi Technologies-related revenues, sales from the segment climbed 36% year on year. The segment generated adjusted EBIT of $137 million for first-quarter 2021, higher than the $63 million recorded in the corresponding period of 2020, beating the consensus mark of $111 million.  

Fuel Injection: Sales and adjusted EBIT from the segment totaled $475 million and $33 million, respectively. The sales figure topped the Zacks Consensus Estimate of $461 million. Adjusted EBIT margin for the quarter was 6.9%.

Aftermarket: Sales and adjusted EBIT from the segment totaled $197 million and $21 million, respectively. The sales figure missed the Zacks Consensus Estimate of $209 million. Adjusted EBIT margin for the quarter came in at 10.7%.

Financial Position

As of Mar 31, 2021, BorgWarner had $1,755 million in cash compared with $901 million as of Mar 31, 2020. In the March-end quarter, long-term debt was $3,708 million, up from the $1,664 million recorded in the prior-year period.

Net cash provided by operating activities was $342 million during the first quarter compared with the $263 million witnessed in the year-ago period. Investment in capital expenditure, including tooling outlays, was $195 million in the March-end quarter compared with the year-ago quarter’s $117 million.

Outlook

For full-year 2021, the company anticipates net sales within $14.8-$15.4 billion, slightly up from the previous guidance of $14.7-$15.3 billion.  Adjusted operating margin and net earnings are expected in the band of 10.1-10.5% and $3.42-$3.92 per share, respectively, higher than the earlier guidance of 10-10.5% and $3.23-$3.77 per share, respectively. Free cash flow is projected between $800 million and $900 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -6.94% due to these changes.

VGM Scores

Currently, BorgWarner has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, BorgWarner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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