BorgWarner Earnings: Margins Keep Growing, but Profit Drops

BorgWarner Inc. (NASDAQ:BWA) reported its results for the second quarter. BorgWarner is a global supplier of engineered automotive systems and components, mainly for powertrain applications.

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BorgWarner Inc. Earnings Cheat Sheet

Results: Net income for BorgWarner Inc. fell to $120.6 million ($1 per share) vs. $162 million ($1.31 per share) a year earlier. This is a decline of 25.6% from the year-earlier quarter.

Revenue: Rose 2.1% to $1.86 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: BorgWarner Inc. fell short of the mean analyst estimate of $1.37 per share. It fell short of the average revenue estimate of $1.97 billion.

Quoting Management: “We executed very well in the second quarter,” said Timothy Manganello, Chairman and CEO of BorgWarner. “Despite declines in light vehicle and commercial vehicle production in Europe, our largest market, the focus on fuel economy and improved emissions around the globe continued to drive growth for BorgWarner. Excluding the negative impact of foreign currencies and 2011 dispositions, our net sales were up approximately 10% in the second quarter compared with second quarter 2011. Our growth was in line with global light vehicle production growth of 10%, although much of the industry’s growth was in Japan, a market that comprises less than 5% of our sales. While growing our net sales in the quarter, we did an excellent job managing costs, which resulted in an all-time record operating income margin of 12.5%, excluding non-comparable items.”

Key Stats:

Last quarter’s profit decrease ends a four-quarter streak of profit increases. In the first quarter, net income rose 26.9% from the year earlier, while the figure increased 9.2% in the fourth quarter of the last fiscal year, 32.7% in the third quarter of the last fiscal year and 95.7% in the second quarter of the last fiscal year.

Revenue has increased for four quarters in a row. Revenue increased 10.5% to $1.91 billion in the first quarter. The figure rose 15.7% in the fourth quarter of the last fiscal year from the year earlier and climbed 27% in the third quarter of the last fiscal year from the year-ago quarter.

For two quarters in a row, the company has come in under analyst estimates. In the first quarter, it missed expectations by one cent with net income of $1.28 versus a mean estimate of net income of $1.29 per share.

Looking Forward: Expectations for the company’s next-quarter results are lower than they have been. Over the past sixty days, the average estimate for third quarter has fallen from $1.34 per share to $1.29. For the fiscal year, the average estimate has moved down from $5.50 a share to $5.36 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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