BorgWarner Downgraded to Neutral - Analyst Blog
23 Décembre 2011 - 4:55PM
Zacks
We recently downgraded our recommendation on
BorgWarner Inc. (BWA) to Neutral from Outperform.
Headquartered in Michigan, BorgWarner is a leading manufacturer of
powertrain products for the world's major automakers
including Volkswagen AG (VLKAY) and Ford Motor
Co. (F).
Its products include four-wheel-drive and all-wheel-drive
transfer cases (primarily for light trucks and sport utility
vehicles or SUVs), as well as automatic transmission and timing
chain systems.
The company released its third quarter 2011 earnings on October
28, 2011. BorgWarner realized a profit of $1.15 per share, up 64%
from 70 cents per share (excluding non-recurring item) in the
year-ago quarter.
Net sales surged 27% to $1.79 billion from $1.41 billion in the
year-ago quarter on the back of strong demand for the company’s
products, which are amenable to improved fuel economy and ensure
emission standards.
Operating margin income rose to $198.8 million from $123.0
million in the prior-year quarter. Consequently, operating margin
improved to 11% from 9% in the year-ago quarter. The increase was
attributable to the company’s cost management measures.
BorgWarner expects net new powertrain business of $2.5
billion from 2012 till 2014, reflecting a 9% increase from its
previous three-year net new business. About 80% of the new business
is expected to come from engine-related products including
turbochargers, ignition systems, emissions products, engine timing
systems, variable cam timing modules and thermal systems.
The remaining 20% of the business is expected to emanate from
drivetrain-related products such as the company’s
fuel-efficient DualTronic transmission technology, traditional
automatic transmission and all-wheel drive technologies.
However, BorgWarner faces continued pricing pressure from the
OEMs to reduce costs. Annual price reductions to OEM customers have
become a permanent feature of its business. The company’s ability
to pass through increased raw material costs to its OEM customers
is limited, with cost recovery often less than 100% and often on a
delayed basis.
Moreover, the company’s high concentration of sales to its major
customers such as Volkswagen and Ford also makes it more vulnerable
to risks.
Considering all these factors, the shares of
BorgWarner are also maintaining a
Zacks #3
Rank reflecting a short-term “Hold” rating.
BORG WARNER INC (BWA): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
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