BorgWarner Shares Hammered On Lower Second-Quarter Earnings And Downward Adjustment In Full-Year Guidance

Powertrain supplier BorgWarner Inc. BWA reported lower second-quarter sales and income Thursday (July 25). It reduced second-half expectations because of volatile conditions for passenger vehicles, especially in China. 

The Auburn Hills, Michigan-based maker of hybrid, electric and conventional transmissions for passenger cars and trucks said sales of $2.55 billion were down 5.3 percent from $2.69 billion in the same quarter in 2018. 

Net income in the second quarter of 2019 was $172 million, or $1.00 per diluted share. Year-ago income was $272 million or $1.18 per share.

A consensus of 10 analysts predicted earnings per diluted share of $1.00, according to investor site Seeking Alpha.com. BorgWarner exceeded consensus estimates in three of the last four quarters.

The company lowered full-year 2019 guidance. Net sales are expected to be in the range of $9.94 billion to $10.18 billion, a 2.5 percent decline to flat compared with 2018. BorgWarner expects its market to decline 3.5 percent to 5 percent in 2019. 

Shares traded 4.8 percent lower on the news, down $2.04 at $40.44 at 1 p.m. Thursday.

Expectations for global light vehicle production remain volatile, particularly in China. BorgWarner expects foreign currencies to negatively impact year-over-year sales by $270 million, primarily due to the depreciation of the Euro, Chinese Renminbi and Korean Won. 

The impact of foreign currencies reduced second-quarter net sales by about $106 million, or $0.04 per diluted share compared with the second quarter of 2018. Lower revenue, the cost of recently enacted tariffs and supplier cost reductions out of synch with normal customer price deflation also contributed to the lower income, the company said in a statement.

For the first six months of 2019, net sales were $5.2 billion, down 6.6 percent from $5.5 billion in the first half of 2018. Net income in the first six months of 2019 was $332 million, or $1.60 per diluted share, compared with $497 million, or $2.36 per diluted share, in the first half of 2018.

The impact of foreign currencies decreased net sales by approximately $233 million and decreased net earnings by approximately $0.10 per diluted share in the first six months of 2019 compared with the first six months of 2018.

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