Jefferies Favors BorgWarner And Delphi, Neutral On Tenneco

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Mobility innovation is expected to drive “the next leg” of the automotive industry’s growth, and auto suppliers that have “value-add products in categories that drive improved fuel efficiency or active safety evolution are appear most likely to outperform,” Jefferies’ David Kelley said in a report.

BorgWarner

Kelly initiated coverage of BorgWarner Inc. BWA with a Buy rating and a price target of $43. He mentioned that the company was a propulsion leader and its growth would be driven by the growing penetration of internal combustion.

Turbochargers accounted for 31 percent of BorgWarner’s 2015 revenue and is the company’s largest product segment. Increasing global regulatory pressures would likely exert pressure on ICE engines, while turbocharger penetration is expected to grow.

The analyst added that the Remy acquisition positions BorgWarner for “improved alternative powertrain penetration given a growing product portfolio of electric motors and thermal management and synergies across drivetrain and stop-start technology.”

Delphi Automotive

Kelly initiated coverage of Delphi Automotive PLC DLPH with a Buy rating and a price target of $80. He considers the company as being the “best positioned” to benefit from the growing penetration of Electronics & Safety and Powertrain Systems segment technologies.

The Electronic Architecture segment would benefit from the expected trends of rising electrification across multiple vehicle function.

Tenneco

The analyst initiated coverage of Tenneco Inc TEN with a Hold rating and a price target of $62. He mentioned that the company’s Clean Air division was poised to benefit from the “continued rollout of global emissions regulations of criteria pollutants.”

Tenneco’s aftermarket business, Ride Performance, appears underappreciated and could continue to outperform backed by favorable industry fundamentals.

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Posted In: Analyst ColorLong IdeasReiterationAnalyst RatingsTrading IdeasDavid L. KelleyJefferies
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