• Organic Sales: $3.4 billion, down 5% year-over-year.
• Market Outperformance: Outgrew market by 270 basis points year-to-date.
• Operating Margin: 10.1%, up 50 basis points from last year.
• Earnings Per Share (EPS): $1.09, $0.11 higher than prior year.
• Free Cash Flow: $201 million in Q3.
• Share Repurchase: Completed $400 million repurchase for 2024.
• Full Year Sales Guidance: $14.0 billion to $14.2 billion.
• Full Year Margin Outlook: Increased to 9.8% to 10.0%.
• Full Year EPS Guidance: $4.15 to $4.30 per diluted share.
• Full Year Free Cash Flow Guidance: $475 million to $575 million.

• Warning! GuruFocus has detected 6 Warning Signs with BWA.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BorgWarner Inc (NYSE:BWA) reported a strong adjusted operating margin of 10.1% for the third quarter, which was 50 basis points higher than the previous year.
• The company secured multiple new product awards, including high-voltage coolant heater business wins in Asia and turbochargers for GM's Corvette ZR1, demonstrating its strong market presence and product leadership.
• BorgWarner Inc (NYSE:BWA) outperformed the market with a 5% decline in organic sales compared to a 6% decline in the market, showcasing its resilient technology-focused portfolio.
• The company completed its planned 2024 repurchase of $400 million of BorgWarner stock, reflecting strong cash flow and commitment to shareholder returns.
• BorgWarner Inc (NYSE:BWA) increased its full-year margin and earnings guidance, highlighting confidence in its operational performance and cost control measures.

Negative Points

• BorgWarner Inc (NYSE:BWA) experienced a 5% year-over-year decline in organic sales for the third quarter, reflecting challenging market conditions.
• The company's full-year sales guidance was reduced due to a lower market production outlook and modestly lower eProduct sales.
• The acquisition of Eldor resulted in a $14 million drag on operating income year-over-year, impacting profitability.
• The $24 million benefit from volume-related customer recoveries in the third quarter is a one-time item and not expected to recur.
• BorgWarner Inc (NYSE:BWA) faces a volatile market environment, with anticipated 5% to 7% year-over-year decline in market production during the fourth quarter of 2024.

Q & A Highlights

Q: How should we think about BorgWarner's margins moving forward, given the current performance? A: Craig Aaron, CFO, explained that the strong operational performance in the quarter was due to restructuring actions and cost controls. For the fourth quarter, they expect revenue to be down roughly 3%, with a mid-teens decremental conversion, aiming for a 9.6% margin at the midpoint of their guidance.

Q: Can you elaborate on the $24 million benefit for ePropulsion and its recurrence? A: Craig Aaron, CFO, clarified that the $24 million volume-related customer recoveries for ePropulsion is a one-time item and should not be expected to repeat in future quarters.

Q: With the new segment structure, can you discuss the growth and margin profile of the battery business? A: Frederic Lissalde, CEO, noted strong sales in Europe and efficient decremental performance. The business is expected to continue incrementing at mid-teens as it scales, with no current supply constraints.

Q: How is BorgWarner managing the potential for more customer recoveries due to EV program changes? A: Frederic Lissalde, CEO, stated that each case is specific, and BorgWarner focuses on flexibility in design and production to adapt to customer needs and market changes.

Q: Can you comment on the impact of hybrid demand on BorgWarner's foundational product segments? A: Frederic Lissalde, CEO, explained that advanced hybrid powertrains will utilize products from both the turbos and thermal technologies segment and the drivetrain and more systems segment, supporting growth in these areas.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.