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Why Is BorgWarner (BWA) Down 1.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for BorgWarner (BWA - Free Report) . Shares have lost about 1.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BorgWarner due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
BorgWarner's Q2 Earnings Beat, '23 View Cut
BorgWarner reported adjusted earnings of $1.35 per share for second-quarter 2023, up from $1.05 recorded in the prior-year quarter. The bottom line also outpaced the Zacks Consensus Estimate of $1.14 per share. The automotive equipment supplier reported net sales of $4,520 million, which surpassed the Zacks Consensus Estimate of $4,395 million. The top line also increased by 20% year over year.
Segmental Performance
Air Management: Net sales totaled $2,027 million in the reported quarter compared with $1,724 million in the year-ago period. Sales also surpassed our estimate of $1,958.5 million. Adjusted operating income of $307 million rose from $244 million recorded in the year-ago quarter and topped our estimate of $294.1 million.
Drivetrain & Battery Systems: Net sales totaled $1,118 million in the reported quarter compared with $896 million in the year-ago period and surpassed our projection of $1,013.3 million. Adjusted operating income of $140 million increased from $113 million recorded in the year-ago quarter.
e-Propulsion: Sales from the segment were $567 million, up from $432 million a year ago and also outpacing our estimate of $520.6 million. The segment incurred an adjusted operating loss of $19 million, narrower than $42 million in the corresponding period of 2022.
Fuel Systems: Sales from the segment totaled $605 million, up from $516 million generated in the year-ago quarter. The metric fell short of our estimate of $611.1 million. The segment generated an adjusted operating income of $57 million, up from $44 million recorded in the corresponding period of 2022 but lagging our estimate of $61.2 million.
Aftermarket: Sales from the segment totaled $339 million, up from $326 million in the year-ago quarter. The figure, however, lagged our estimate of $349.6 million. The segment generated an adjusted operating income of $52 million, up from $51 million, but lagged our estimate of $54 million.
Financial Position
In the April-June quarter, BorgWarner had $848 million in cash/cash equivalents/restricted cash compared with $1,338 million as of Dec 31, 2022. In the June quarter, long-term debt was $4,191 million, up from $4,166 million recorded on Dec 31, 2022.
Net cash provided in operating activities was $280 million in the quarter under review. Capital expenditures and FCF totaled $242 million and $38 million, respectively.
Updated 2023 Guidance
For full-year 2023, the company anticipates net sales within $14.2-$14.6 billion. Adjusted operating margin is expected in the band of 9.2-9.6%.Adjusted earnings are estimated to be within $3.50-$3.85 per share. Free cash flow is projected in the band of $400-$500 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -27.59% 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 D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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. It's no surprise BorgWarner has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
BorgWarner is part of the Zacks Automotive - Original Equipment industry. Over the past month, Allison Transmission (ALSN - Free Report) , a stock from the same industry, has gained 2.7%. The company reported its results for the quarter ended June 2023 more than a month ago.
Allison Transmission reported revenues of $783 million in the last reported quarter, representing a year-over-year change of +17.9%. EPS of $1.92 for the same period compares with $1.26 a year ago.
Allison Transmission is expected to post earnings of $1.71 per share for the current quarter, representing a year-over-year change of +17.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Allison Transmission. Also, the stock has a VGM Score of C.
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Why Is BorgWarner (BWA) Down 1.6% Since Last Earnings Report?
A month has gone by since the last earnings report for BorgWarner (BWA - Free Report) . Shares have lost about 1.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BorgWarner due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
BorgWarner's Q2 Earnings Beat, '23 View Cut
BorgWarner reported adjusted earnings of $1.35 per share for second-quarter 2023, up from $1.05 recorded in the prior-year quarter. The bottom line also outpaced the Zacks Consensus Estimate of $1.14 per share. The automotive equipment supplier reported net sales of $4,520 million, which surpassed the Zacks Consensus Estimate of $4,395 million. The top line also increased by 20% year over year.
Segmental Performance
Air Management: Net sales totaled $2,027 million in the reported quarter compared with $1,724 million in the year-ago period. Sales also surpassed our estimate of $1,958.5 million. Adjusted operating income of $307 million rose from $244 million recorded in the year-ago quarter and topped our estimate of $294.1 million.
Drivetrain & Battery Systems: Net sales totaled $1,118 million in the reported quarter compared with $896 million in the year-ago period and surpassed our projection of $1,013.3 million. Adjusted operating income of $140 million increased from $113 million recorded in the year-ago quarter.
e-Propulsion: Sales from the segment were $567 million, up from $432 million a year ago and also outpacing our estimate of $520.6 million. The segment incurred an adjusted operating loss of $19 million, narrower than $42 million in the corresponding period of 2022.
Fuel Systems: Sales from the segment totaled $605 million, up from $516 million generated in the year-ago quarter. The metric fell short of our estimate of $611.1 million. The segment generated an adjusted operating income of $57 million, up from $44 million recorded in the corresponding period of 2022 but lagging our estimate of $61.2 million.
Aftermarket: Sales from the segment totaled $339 million, up from $326 million in the year-ago quarter. The figure, however, lagged our estimate of $349.6 million. The segment generated an adjusted operating income of $52 million, up from $51 million, but lagged our estimate of $54 million.
Financial Position
In the April-June quarter, BorgWarner had $848 million in cash/cash equivalents/restricted cash compared with $1,338 million as of Dec 31, 2022. In the June quarter, long-term debt was $4,191 million, up from $4,166 million recorded on Dec 31, 2022.
Net cash provided in operating activities was $280 million in the quarter under review. Capital expenditures and FCF totaled $242 million and $38 million, respectively.
Updated 2023 Guidance
For full-year 2023, the company anticipates net sales within $14.2-$14.6 billion. Adjusted operating margin is expected in the band of 9.2-9.6%.Adjusted earnings are estimated to be within $3.50-$3.85 per share. Free cash flow is projected in the band of $400-$500 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -27.59% 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 D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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. It's no surprise BorgWarner has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
BorgWarner is part of the Zacks Automotive - Original Equipment industry. Over the past month, Allison Transmission (ALSN - Free Report) , a stock from the same industry, has gained 2.7%. The company reported its results for the quarter ended June 2023 more than a month ago.
Allison Transmission reported revenues of $783 million in the last reported quarter, representing a year-over-year change of +17.9%. EPS of $1.92 for the same period compares with $1.26 a year ago.
Allison Transmission is expected to post earnings of $1.71 per share for the current quarter, representing a year-over-year change of +17.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Allison Transmission. Also, the stock has a VGM Score of C.