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BorgWarner Inc BWA

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Morningstar’s Analysis

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BorgWarner Reports Solid Q1 as Recovery Continues, Tweaks 2021 Guidance Higher; Maintaining $73 FVE

Richard Hilgert Senior Equity Analyst

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.

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Company Profile

Business Description

BorgWarner is a Tier I auto-parts supplier with four operating segments. The air management group makes turbochargers, e-boosters, e-turbos, timing systems, emissions systems, thermal systems, gasoline ignition technology, powertrain sensors, cabin heaters, battery heaters, and battery charging. The e-propulsion and drivetrain group produces e-motors, power electronics, control modules, software, automatic transmission components, and torque management products. The two remaining operating segments are the eponymous fuel injector and aftermarket groups. The company's largest customers are Ford and Volkswagen at 13% and 11% of 2020 revenue, respectively. Geographically, Europe accounted for 35% of 2020 revenue, while Asia was 34% and North America was 30%.

3850 Hamlin Road
Auburn Hills, MI, 48326
T +1 248 754-9200
Sector Consumer Cyclical
Industry Auto Parts
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 49,700