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It has been about a month since the last earnings report for BorgWarner (BWA). Shares have lost about 4.9% 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 drivers.
BorgWarner's Q3 Earnings & Sales Beat Estimates
BorgWarner reported adjusted earnings of 80 cents per share for third-quarter 2021, declining from 88 cents recorded in the prior-year period. The bottom line, however, beat the Zacks Consensus Estimate of 66 cents. Higher-than-anticipated revenues from Air Management and Aftermarket segments resulted in the outperformance.
This automotive equipment supplier reported net sales of $3,416 million, outpacing the Zacks Consensus Estimate of $3,342 million. Further, the top-line figure grew 34.8% year over year, thanks to the Delphi Technologies buyout and increased demand for products.
Air Management: Net sales totaled $1,671 million for the reported quarter compared with $1,476 million registered in the year-ago period. The sales figure also topped the Zacks Consensus Estimate of $1,621 million. Adjusted EBIT of $214 million outpaced the consensus mark of $197 million but declined from $225 million recorded in third-quarter 2020.
e-Propulsion & Drivetrain: Sales from the segment came in at $1,223 million, up from $1,075 million in third-quarter 2020. The sales figure, however, fell short of the Zacks Consensus Estimate of $1,233 million. The segment generated an adjusted EBIT of $85 million for third-quarter 2021 compared with $131 million recorded in the corresponding period of 2020. The metric also lagged the consensus mark of $110 million.
Fuel Injection: Sales and adjusted EBIT from the segment totaled $420 million and $37 million, respectively. The sales figure marginally missed the Zacks Consensus Estimate of $421 million.
Aftermarket: Sales and adjusted EBIT from the segment totaled $227 million and $29 million, respectively. The sales figure outpaced the Zacks Consensus Estimate of $191 million.
As of Sep 30, 2021, BorgWarner had $1,507 million in cash compared with $1,650 million on Dec 31, 2020. For the September-end quarter, long-term debt was $4,288 million, up from $3,738 million recorded on Dec 31, 2020. Net cash provided by operating activities was $142 million for the third quarter. Investment in capital expenditure, including tooling outlays, was $152 million. Free cash flow was a negative $10 million for the third quarter of 2021.
For full-year 2021, the company now anticipates net sales within $14.4-$14.7 billion, down from the previous guided range of $15.2-$15.6 billion. Adjusted operating margin and net earnings are expected in the band of 9.6-10% and $3.65-$3.95 per share, lower than the earlier guidance of 10.2-10.5% and $4.15-$4.40, respectively. Free cash flow is projected in the band of $600-$700 million versus the prior guided range of $800-$900 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -9.76% due to these changes.
At this time, BorgWarner has a nice Growth Score of B, though it is lagging a bit on the Momentum Score 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, BorgWarner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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