BorgWarner Inc. Earnings: Five Quarters in a Row of Expanding Margins, Net Income Climbs

BorgWarner Inc. (NASDAQ:BWA) reported net income above Wall Street’s expectations for the second quarter. BorgWarner Inc. is a global supplier of engineered automotive systems and components, mainly for powertrain applications.

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BorgWarner Earnings Cheat Sheet for the Second Quarter

Results: Net income for BorgWarner Inc. rose to $162 million ($1.31 per share) vs. $82.8 million (68 cents per share) in the same quarter a year earlier. This marks a rise of 95.7% from the year earlier quarter.

Revenue: Rose 27.9% to $1.82 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: BWA reported adjusted net income of $1.12 per share. By that measure, the company beat the mean estimate of 98 cents per share. It beat the average revenue estimate of $1.74 billion.

Quoting Management: “Our business continued to strengthen in the second quarter,” said Timothy Manganello, Chairman and CEO of BorgWarner. “Increased global demand for our advanced powertrain technology, focused on improving fuel economy, performance and emissions reduction, continued to drive growth for our company far in excess of industry growth. Excluding the impact of currency and sales related to the acquisition of Haldex Traction Systems, which closed in first quarter 2011, our sales were up approximately 15% in the second quarter, compared with a 2% decline in global vehicle production. While growing our sales in the quarter, we also successfully managed costs, commodity pressures and the impact of the Japanese earthquake. This resulted in a strong operating income margin of 11.0%, excluding a non-recurring item.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 36.6%, with the biggest boost coming in the second quarter of the last fiscal year when revenue rose 55.2% from the year earlier quarter.

Last quarter marked the fifth consecutive quarter of gross margins expanding as the company’s gross margin expanded 0.3 percentage point to 19.6% from the year earlier quarter. Over that span, margins have grown on average three percentage points per quarter on a year-over-year basis.

From the first quarter, the company’s current liabilities rose to $1.94 billion from $1.53 billion.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 4 cents in the first quarter, by 6 cents in the fourth quarter of the last fiscal year, and by 8 cents in the third quarter of the last fiscal year.

Competitors to Watch: Dana Holding Corporation (NYSE:DAN), Cummins Inc. (NYSE:CMI), Enova Systems, Inc. (AMEX:ENA), Standard Motor Products, Inc. (NYSE:SMP), Federal-Mogul Corporation (NASDAQ:FDML), Westport Innovations Inc. (NASDAQ:WPRT), Lear Corporation (NYSE:LEA), and Tenneco Inc. (NYSE:TEN).

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(Source: Xignite Financials)