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Category: Stock Market and Borgwarner
Date: 16 February 2020 Stock Price: $34.15 We take a look at the 4th quarter earnings release of their 2019 fiscal year of Borgwarner a manufacturer of efficient technologies solutions for combustion, hybrid and electric vehicles. They are known for their turbo's they build for combustion engine vehicles.
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About Borgwarner
BorgWarner Inc. (NYSE: BWA) is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. With manufacturing and technical facilities in 67 locations in 19 countries, the company employs approximately 29,000 worldwide
Overview of Borgwarner's 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified othewise
- Revenue:$2.599 billion (up from $2.574 billion from the same quarter of the previous year)
- Revenues increased by 0.97% over the last 12 months
- Cost of sales: $2.014 billion (down from $2.030 billion for the same quarter of the previous year)
- Cost of sales decreased by -0.78% over the last 12 months
- Net income: $220 million (down from $230 million for the same quarter of the previous year)
- Diluted earnings per share: $1.06 (down from $1.10 for the same quarter of the previous year)
- PE ratio of Borgwarner: 9.45
- Diluted weighted-average shares outstanding: 206.9 million (down from 208.6 million for the same quarter of the previous year)
- Cash and cash equivalents: $832 million
- Cash and cash equivalents per share: $4.02
- Cash and cash equivalents makes up 11.77% of Borgwarner's market capital
- Cash and cash equivalents makes up 8.5% of Borgwarner's total assets
- Receivables: $1.921 billion
- Receivables makes up 19.8% of Borgwarner's total assets
- Shareholders equity in Borgwarner: $4.844 billion
- Shareholders equity per Borgwarner share: $23.41
- Borgwarner is trading at 1.46 times its shareholders equity which is outside the expected range of between 2 and 4 times that most firms tend to trade at
- Cash generated from operations for the full fiscal year: $1.008 billion
- Cash generated from operations per share for the full fiscal year: $4.87
Borgwarner management commentary on their 4th quarter 2019 earnings
Auburn Hills, Michigan, February 13, 2020 – BorgWarner Inc. (NYSE: BWA) today reported 2019 fourth quarter and full-year results.
Engine Segment Results:
Engine segment net sales were $1,533 million in the fourth quarter 2019 compared with $1,541 million in fourth quarter 2018. Excluding the impact of foreign currencies and the divestiture of the thermostat product line, net sales were up 3.5% from the prior year. Adjusted earnings before interest, income taxes and non-controlling interest ("Adjusted EBIT") were $264 million in the fourth quarter of 2019. Excluding the impact of foreign currencies and the divestiture of the thermostat product line, Adjusted EBIT was up 11.2% from the fourth quarter of 2018. The increase in Adjusted EBIT was primarily due to impact of higher revenue excluding the impact of weaker currencies and lower SG&A and R&D expense.
Drivetrain Segment Results:
Drivetrain segment net sales were $1,042 million in the fourth quarter 2019 compared with $1,047 million in the fourth quarter 2018. Excluding the impact of foreign currencies, net sales were up 1.5% from the prior year. Adjusted EBIT was $136 million in the fourth quarter 2019. Excluding the impact of foreign currencies, Adjusted EBIT was up 7.7% from the fourth quarter 2018. The increase in Adjusted EBIT was primarily due to supplier cost savings and lower R&D costs.
Engine Segment Results:
Engine segment net sales were $1,533 million in the fourth quarter 2019 compared with $1,541 million in fourth quarter 2018. Excluding the impact of foreign currencies and the divestiture of the thermostat product line, net sales were up 3.5% from the prior year. Adjusted earnings before interest, income taxes and non-controlling interest ("Adjusted EBIT") were $264 million in the fourth quarter of 2019. Excluding the impact of foreign currencies and the divestiture of the thermostat product line, Adjusted EBIT was up 11.2% from the fourth quarter of 2018. The increase in Adjusted EBIT was primarily due to impact of higher revenue excluding the impact of weaker currencies and lower SG&A and R&D expense.
Drivetrain Segment Results:
Drivetrain segment net sales were $1,042 million in the fourth quarter 2019 compared with $1,047 million in the fourth quarter 2018. Excluding the impact of foreign currencies, net sales were up 1.5% from the prior year. Adjusted EBIT was $136 million in the fourth quarter 2019. Excluding the impact of foreign currencies, Adjusted EBIT was up 7.7% from the fourth quarter 2018. The increase in Adjusted EBIT was primarily due to supplier cost savings and lower R&D costs.
Full Year 2020 Guidance:
The company has provided 2020 full year guidance. This guidance is for BorgWarner as currently consolidated and excludes the potential impact from the acquisition of Delphi Technologies PLC, which BorgWarner announced on January 28, 2020. Net sales are expected to be in the range of $9,750 million to $10,075 million. This implies year-over-year organic sales change of down 2.5% to up 0.5%.
The company expects its blended light-vehicle market to decline in the range of 2.0% to 4.0% in 2020. Global light vehicle production expectations remain volatile, particularly in China. Foreign currencies are expected to result in a year-over-year decrease in sales of $130 million, primarily due to the depreciation of the Euro, Chinese Renminbi and Korean Won against the U.S. dollar. The divestiture of the thermostat product line will decrease year-over-year sales by approximately $30 million.
Operating margin is expected to be in the range of 10.0% to 11.0%. Excluding the impact of non-comparable items, adjusted operating margin is expected to be in the range of 11.6% to 12.0%. Net earnings are expected to be within a range of $3.22 to $3.75 per diluted share.
Excluding the impact of non-comparable items, adjusted net earnings are expected to be within a range of $3.85 to $4.15 per diluted share. Full-year operating cash flow is expected to be approximately $1,250 million, while free cash flow is expected to be in the range of $675 million to $725 million.
The company has provided 2020 full year guidance. This guidance is for BorgWarner as currently consolidated and excludes the potential impact from the acquisition of Delphi Technologies PLC, which BorgWarner announced on January 28, 2020. Net sales are expected to be in the range of $9,750 million to $10,075 million. This implies year-over-year organic sales change of down 2.5% to up 0.5%.
The company expects its blended light-vehicle market to decline in the range of 2.0% to 4.0% in 2020. Global light vehicle production expectations remain volatile, particularly in China. Foreign currencies are expected to result in a year-over-year decrease in sales of $130 million, primarily due to the depreciation of the Euro, Chinese Renminbi and Korean Won against the U.S. dollar. The divestiture of the thermostat product line will decrease year-over-year sales by approximately $30 million.
Operating margin is expected to be in the range of 10.0% to 11.0%. Excluding the impact of non-comparable items, adjusted operating margin is expected to be in the range of 11.6% to 12.0%. Net earnings are expected to be within a range of $3.22 to $3.75 per diluted share.
Excluding the impact of non-comparable items, adjusted net earnings are expected to be within a range of $3.85 to $4.15 per diluted share. Full-year operating cash flow is expected to be approximately $1,250 million, while free cash flow is expected to be in the range of $675 million to $725 million.
Borgwarner (NYSE: BWA) stock price history
The image below shows the stock price history of Borgwarner (NYSE:BWA) over the last 5 years. And its not been a good time for Borgwarner stockholders. 5 years ago the stock was trading at around $61.30 a stock and its currently trading at $34.15. That's a loss of -44.3% suffered by Borgwarner stockholders over the last 5 years.
The stock of Borgwarner is currently trading at a lot closer to its 52 week low of $30.71 than it is to its 52 week high of $46.60 which to us is a clear indication that the short term sentiment and momentum of Borgwarner stock is positive at this point in time.
The stock of Borgwarner is currently trading at a lot closer to its 52 week low of $30.71 than it is to its 52 week high of $46.60 which to us is a clear indication that the short term sentiment and momentum of Borgwarner stock is positive at this point in time.
Recent coverage of Borgwarner (NYSE: BWA)
The extract below shows recent coverage of Borgwarner as obtained from TheStreet.com
Delphi Technologies (DLPH) jumped more than 60% premarket after the company agreed to be acquired by BorgWarner (BWA) - Get Report, a $3.3 billion deal that combines two major producers of auto parts. Under the terms, Delphi holders would get 0.4534 BorgWarner share for each of their shares. The deal would give BorgWarner holders 84% of the new company and Delphi holders 16%.
At last check, Delphi shares were up 62% at $15.91. BorgWarner shares were trading off 6.7% at $35.78. Delphi, London, makes power-train fuel-injection systems for legacy combustion automobiles as well as hybrid and electric vehicles. The deal creates an international pure-play propulsion company, serving light- and commercial-vehicle producers and the aftermarket, the companies said. The deal “[strengthens] our position in electrified propulsion as well as our combustion, commercial vehicle and aftermarket businesses," BorgWarner CEO Frédéric Lissalde said in a statement. "We are confident that together we will be able to move faster to address market trends toward electrification."
Read the full article here
Delphi Technologies (DLPH) jumped more than 60% premarket after the company agreed to be acquired by BorgWarner (BWA) - Get Report, a $3.3 billion deal that combines two major producers of auto parts. Under the terms, Delphi holders would get 0.4534 BorgWarner share for each of their shares. The deal would give BorgWarner holders 84% of the new company and Delphi holders 16%.
At last check, Delphi shares were up 62% at $15.91. BorgWarner shares were trading off 6.7% at $35.78. Delphi, London, makes power-train fuel-injection systems for legacy combustion automobiles as well as hybrid and electric vehicles. The deal creates an international pure-play propulsion company, serving light- and commercial-vehicle producers and the aftermarket, the companies said. The deal “[strengthens] our position in electrified propulsion as well as our combustion, commercial vehicle and aftermarket businesses," BorgWarner CEO Frédéric Lissalde said in a statement. "We are confident that together we will be able to move faster to address market trends toward electrification."
Read the full article here
Borgwarner (NYSE: BWA) latest stock valuation
So based on the 4th quarter 2019 earnings report of Borgwarner (NYSE:BWA) and their fiscal guidance provided for the 2020 fiscal year what do we value Borgwarner stock at? Based on the earnings report an their fiscal guidance our valuation model provides a target price (full value price) for Borgwarner at $51.50 a stock.
We therefore feel that the stock of Borgwarner is undervalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $51.50 A good entry point into the stock of Borgwarner would therefore be at $46.30 or below. We expect the stock of Borgwarner to kick up on price in coming weeks and months to levels closer to our target price (full value price).
We therefore feel that the stock of Borgwarner is undervalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $51.50 A good entry point into the stock of Borgwarner would therefore be at $46.30 or below. We expect the stock of Borgwarner to kick up on price in coming weeks and months to levels closer to our target price (full value price).
Next earnings release of Borgwarner
It is expected that Borgwarner will release their 1st quarter 2020 earnings report in middle May 2020