uploads/2016/08/f-pm-5.png

Seaport Global Securities Rated BorgWarner as ‘Neutral’

By

Updated

Price movement

BorgWarner (BWA) has a market cap of $7.3 billion. It rose by 0.84% to close at $33.71 per share on August 9, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 4.9%, 8.7%, and -21.4%, respectively, on the same day. BWA is trading 3.3% above its 20-day moving average, 4.2% above its 50-day moving average, and 5.4% below its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The First Trust Large Cap Value AlphaDex ETF (FTA) invests 0.56% of its holdings in BorgWarner. The ETF tracks an index that selects and weights value stocks from the S&P 500 Value Index using fundamental factors including sales, book value, and cash flows. The YTD price movement of FTA was 9.3% on August 9.

The market caps of BorgWarner’s competitors are as follows:

  • Cummins (CMI): $21.1 billion
  • Lear Corporation (LEA): $8.4 billion
  • Tenneco (TEN): $3.2 billion

BorgWarner’s rating

Seaport Global Securities has initiated the coverage of BorgWarner with a “neutral” rating.

Article continues below advertisement

Performance of BorgWarner in 2Q16

BorgWarner reported 2Q16 net sales of $2.3 billion, a rise of 15.0% compared to net sales of $2.0 billion in 2Q15. Sales of its engine and drivetrain segments rose by 2.2% and 42.8%, respectively, in 2Q16 compared to 2Q15. The company’s gross profit margin and operating income rose by 1.0% and 11.1%, respectively, in 2Q16 compared to the prior-year period.

Its net income and EPS (earnings per share) rose to $164.4 million and $0.76, respectively, in 2Q16 compared to $148.1 million and $0.65, respectively, in 2Q15. It reported non-GAAP (generally accepted accounting principles) EPS of $0.84 in 2Q16, a rise of 12.0% compared to 2Q15.

BWA’s cash fell by 14.3%, and its inventories rose by 2.9% in 2Q16 compared to 4Q15. Its current ratio rose to 1.34x, and its long-term debt-to-equity ratio fell to 0.56x in 2Q16 compared to a current ratio and long-term debt-to-equity ratio of 1.33x and 0.58x, respectively, in 4Q15.

Quarterly dividend

BorgWarner has declared a quarterly cash dividend of $0.13 per share on its common stock. The dividend will be paid on September 15, 2016, to shareholders of record on September 1, 2016.

Projections

The company has made the following projections for 3Q16:

  • net sales growth in the range of 13.0% to 20.8%
  • net sales growth in the range of 2.5% to 7.7%, excluding the impact of foreign currencies and the Remy acquisition
  • EPS in the range of $0.74 to $0.81, which includes ~$0.03 per share from the Remy acquisition

The company has made the following projections for 2016:

  • net sales growth in the range of 13.7% to 17.5%
  • net sales growth in the range of 3.0% to 5.5%, which excludes the impact of foreign currencies and the Remy acquisition
  • EPS in the range of $3.16 to $3.32, which includes ~$0.12 per share contributed by the Remy acquisition

Now we’ll take a look at Tyson Foods.

Advertisement

More From Market Realist