Analyst Note| Richard Hilgert |
Narrow-moat-rated BorgWarner reported first-quarter earnings per share before special items of $1.21, handily beating the $0.91 FactSet consensus estimate by $0.30 and $0.44 better than the $0.77 reported last year. Consolidated revenue also beat the FactSet consensus by roughly $400 million, jumping 73% to $4.0 billion. Excluding currency and the Delphi acquisition, organic revenue grew 18%, outperforming the market (as weighted by BorgWarner’s geographic exposure) by 5 percentage points, demonstrating our investment thesis that the firm’s change in revenue will outperform the change in its addressable market as automakers rely on the company’s powertrain products that support reduced emissions and vehicle electrification. The 4-star-rated shares of BorgWarner currently trade at an attractive 32% discount to our $73 fair value estimate.