BorgWarner, Inc. (BWA: 45.26 -1.81 -3.85%) just hit a new multi-year high at $47.67 after reporting better than expected Q2 results in late July that included a 16% earnings surprise. The longer-term picture looks solid too with the next-year estimate projecting 29% growth.
Company Description
BorgWarner, Inc., together with its subsidiaries, manufactures and sells engineered automotive systems and components primarily for power train applications worldwide. The company was founded in 1987 and has a market cap of $5.15 billion.
With domestic and international auto sales showing surprising signs of strength, BorgWarner has been able to cash in on the trend, reporting better than expected Q2 results on July 30 that gave its share price a nice pop.
Second-Quarter Results
Revenue for the period was up 55% from last year to $1.42 billion. Earnings also came in strong at 78 cents, 16% ahead of the Zacks Consensus Estimate. BorgWarner now has an average earnings surprise of 54% over the last four quarters.
CEO Timothy Manganello noted that the key drivers of the quarter were increased penetration into global markets, favorable macro-level trends in the economy and a shift in Europe towards more BorgWarner parts.
The company also looks strong in a couple of key categories, with its long-term debt to equity ratio standing at 27.5% against the industry average of 94.6%. Its ROI is 8.3% against its peers 7.5%.
Estimates
The solid quarter pushed estimates higher, with the current year adding 35 cents to $2.74. The next-year estimate is up 31 cents in the same time to $3.54, a bullish 29% growth projection.
Valuation
In spite of the recent string of gains, BWA still looks reasonably priced, trading with a forward P/E multiple of 17X against the industry average of 16X.
2-Year Chart
BWA jumped higher on the good quarter, recently hitting a new multi-year high at $47.67. Look for support from the long-term trend line and recent breakout area at $44 on any weakness. Take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new
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