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BorgWarner (BWA) Down 11.2% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for BorgWarner Inc. (BWA - Free Report) . Shares have lost about 11.2% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is BWA due for a breakout? 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 catalysts.

BorgWarner’s Q4 Earnings Surpass Estimates, Up Y/Y

BorgWarner reported adjusted earnings of $1.07 per share in fourth-quarter 2017, beating the Zacks Consensus Estimate of $1.02. Adjusted earnings increased from 85 cents per share in the year-ago quarter.

BorgWarner logged revenues of $2.59 billion, surpassing the Zacks Consensus Estimate of $2.50 billion. The figure was $2.26 billion in fourth-quarter 2016.

In 2017, adjusted earnings were $3.89 per share, up from $3.27 in previous year. Also, revenues came in at $9.80 billion, higher than $9.1 billion in 2016.

While operating income amounted to $209 million, operating loss in fourth-quarter 2016 was $458 million.

Net loss in the reported quarter came in at $146.2 million compared with $293.3 million in fourth-quarter 2016.

Segment Details

Revenues from the Engine segment increased to $1.58 billion from $1.39 billion in the prior-year quarter. Excluding the impact of foreign currencies, net sales rose 8.4% at the segment.

At the Drivetrain segment, revenues were up $1.02 billion in the fourth quarter from $883.2 million in the prior-year quarter. Excluding the impact of foreign currencies and the net impact of M&A, net sales rallied 13.1% year over year.

Financial Position

BorgWarner had $545.3 million in cash as of Dec 31, 2017 compared with $443.7 million as of Dec 31, 2016. As of Dec 31, 2017, long-term debt increased to $2.10 billion from $2.04 billion as of Dec 31, 2016.

In 2017, net cash provided by operating activities was up to $1.18 billion from $1.04 billion in the previous year. In 2017, capital expenditures, including tooling outlays, increased to $560 million from $500.6 million in 2016.


For first-quarter 2018, the company envisions net earnings to lie within the range of 99 cents to $1.31 per share. Moreover, it expects net organic sales growth of 3-5.5% compared with net sales of $2.41 billion in the year-ago quarter.

For the current year, the company reaffirmed organic growth guidance and projects net sales of around $10.52-$10.69 billion, which translates into organic growth rate of 5-7%.

Furthermore, BorgWarner expects positive impact of foreign currencies on the appreciation of the Euro and Chinese Yuan of $170 million.

Additionally, the company expects net earnings in the range of $4.25-$4.35 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

BorgWarner Inc. Price and Consensus

VGM Scores

At this time, BWA has a great Growth Score of A, though it is lagging a lot on the momentum 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.

Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.


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

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