Will BorgWarner (BWA) Upset Investors This Earnings Season?

BorgWarner Inc. BWA is slated to release first-quarter 2022 results on May 4, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings and revenues is pegged at 80 cents per share and $3.64 billion, respectively. The consensus mark for first-quarter earnings per share has witnessed a downward revision of 8 cents in the past 30 days.

This automotive equipment supplier registered higher-than-anticipated earnings in the last reported quarter on better-than-anticipated revenues across all segments. Over the preceding four quarters, the company exceeded earnings expectations on all occasions, with the average being 33.2%. This is depicted in the graph below:

BorgWarner Inc. Price and EPS Surprise

BorgWarner Inc. Price and EPS Surprise

BorgWarner Inc. price-eps-surprise | BorgWarner Inc. Quote

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for BorgWarner this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here as elaborated below.

Earnings ESP: BorgWarner has an Earnings ESP of +1.17%. This is because the Most Accurate Estimate is pegged 1 cent higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BorgWarner currently holds a Zacks Rank of 4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Predictions

Frequent business wins and a few strategic acquisitions are likely to have a positive impact on BorgWarner’s upcoming results. BorgWarner’s buyout of Delphi Technologies has strengthened its electric propulsion leadership, with expanded capabilities and scale. The acquisition of AKASOL has expanded BorgWarner’s commercial vehicle electrification capabilities and is set to have aided in top-line growth. The buyout of Santroll's light vehicle eMotor business has also bolstered BorgWarner's scale in eMotor product leadership as well as enhanced manufacturing capabilities. These acquisitions are likely to have contributed to BorgWarner’s Q1 revenues.

On the flip side, though, the industry is suffering from chip shortage and rising commodity costs, which are expected to have put pressure on the company’s revenues and profits. Difficult labor market and logistical challenges are also likely to have dented margins. Notably, the global light vehicle production declined 4% year over year in first-quarter 2022. The decline in production is likely to have hurt the demand for BorgWarner’s offerings, which may impact the upcoming results. The Zacks Consensus Estimate for BWA’s first-quarter 2022 earnings and revenues implies a year-over-year fall of 33.9% and 9.2%, respectively.

Here’s a sneak peek into BorgWarner’s first-quarter 2022 segmental revenue and EBIT estimates.

The Zacks Consensus Estimate for BorgWarner’s Air Management segment’s sales is pegged at $1,862 million for the period in discussion, suggesting a fall from $2,011 million reported in first-quarter 2021. EBIT from the segment is estimated at $239 million, indicating deterioration from $322 million recorded in the comparable year-ago period.

The consensus mark for first-quarter sales from the e-Propulsion & Drivetrain segment is pegged at $1,350 million, suggesting a drop from the $1,466 million registered in first-quarter 2021. The segmental EBIT estimate of $83 million also signals a year-over-year contraction of 39.4%.

The consensus mark for the Fuel Injection unit’s quarterly sales is pegged at $451 million, suggesting a decline of 5% year over year. The consensus mark for quarterly sales from the Aftermarket unit is pegged at $201 million, indicating growth from $197 million recorded in first-quarter 2021.

Peer Releases

Here are the key takeaways from earnings releases of BWA peers including Autoliv ALV, Oshkosh Corporation OSK and Magna International MGA.

Autoliv reported first-quarter 2022 adjusted earnings of 45 cents per share, lagging the Zacks Consensus Estimate of $1.29. The bottom line fell 75% from $1.79 per share recorded in the year-ago quarter. The company reported net sales of $2,124 million in the quarter, which missed the Zacks Consensus Estimate of $2,226.7 million. The top line also declined 5.26% from the prior year’s $2,242 million.

ALV currently carries a Zacks Rank #5 (Strong Sell).

Oshkosh reported first-quarter 2022 earnings of 24 cents per share, beating the Zacks Consensus Estimate of 17 cents per share. The bottom line, however, fell from the year-ago reported earnings of $1.13 a share. Revenues of $1,946 million outpaced the consensus mark of $1,874 million and also surged 23.4% on a year-over-year basis.

OSK currently carries a Zacks Rank #5.

Magna reported first-quarter 2022 earnings of $1.28 per share, beating the Zacks Consensus Estimate of $1.05 per share. This compares unfavorably with earnings of $1.86 per share a year ago. Revenues came in at $9,642 million, surpassing the consensus mark of $8,881 million. The top line, however, decreased 5.2% year over year.

MGA currently carries a Zacks Rank #5.

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