Borgwarner Inc ((BWA)) has held its Q3 earnings call. Read on for the main highlights of the call.
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BorgWarner’s recent earnings call conveyed a generally positive sentiment, underscored by strong organic sales growth, new business awards, and improved financial metrics. Despite facing challenges such as a decline in battery and charging sales, a cyber-related shutdown, and ongoing semiconductor supply concerns, the company managed to increase its financial guidance and return substantial value to shareholders.
Strong Organic Sales Growth
BorgWarner reported an organic sales growth of just over 2% in the third quarter. This achievement is particularly notable given the challenges, including downtime at a European customer due to a cyber-related shutdown. Excluding the decline in the CV battery and Charging Systems segment, organic sales were up approximately 4% year-over-year.
New Business Awards
The company secured 8 new business awards across both foundational products and e-products. This success highlights the strength of BorgWarner’s portfolio and the global demand for efficient powertrain technology.
Improved Adjusted Operating Margin
BorgWarner’s adjusted operating margin for the third quarter was 10.7%, marking a 60 basis point increase from the previous year. This improvement was achieved despite a 60 basis point net tariff headwind.
Strong Free Cash Flow
The company generated a robust free cash flow of $266 million in the third quarter, representing a 32% increase from the previous year.
Increased Financial Guidance
BorgWarner has raised its full-year guidance for adjusted margin, adjusted EPS, and free cash flow. The company anticipates full-year sales in the range of $14.1 billion to $14.3 billion, with an adjusted operating margin between 10.3% and 10.5%, and free cash flow of $850 million to $950 million.
Significant Shareholder Returns
BorgWarner returned approximately $136 million, or over 50% of its third-quarter free cash flow, to shareholders through share repurchases and dividends.
Battery and Charging Sales Decline
There was a noted decline in battery and charging sales, which posed a 100 basis point headwind to overall outgrowth projected for 2025.
Cyber-Related Shutdown Impact
A cyber-related shutdown at a European customer negatively impacted sales growth during the quarter.
North American Program Fire Impact
A fire issue at a North American customer affected operations, impacting sales in the fourth quarter.
Continued Semiconductor Supply Concerns
Ongoing global semiconductor supply concerns are expected to be a 60 basis point headwind to year-over-year sales growth.
Forward-Looking Guidance
Looking ahead, BorgWarner has increased its guidance for the full year, projecting sales between $14.1 billion and $14.3 billion. The company expects an adjusted operating margin of 10.3% to 10.5% and free cash flow ranging from $850 million to $950 million. BorgWarner continues to focus on capitalizing on new business opportunities and efficiently deploying capital to drive shareholder value.
In conclusion, BorgWarner’s earnings call reflected a strong performance with positive sentiment, despite some operational challenges. The company demonstrated resilience through strategic new business awards and financial guidance upgrades, underscoring its commitment to delivering shareholder value.