Analyst Note| Richard Hilgert |
Narrow moat rated BorgWarner reported first-quarter earnings per share before special items, or EPS, of $1.05, beating the $0.86 FactSet consensus by $0.19, but $0.16 lower than the $1.21 reported last year. Due to the Ukraine crisis, chip crunch, and China COVID-19 lockdowns causing sporadic customer production, revenue declined 3% to $3.9 billion, compared with $4.0 billion reported a year ago. Organic revenue edged up 1%, outperforming a 7% drop in global light vehicle production weighted to BorgWarner’s customer base by 8 percentage points as new business launches offset the market decline. Top-line results also beat the consensus by 4%. We maintain our investment thesis that BorgWarner will increase revenue at above-market rates as its products reduce emissions and support vehicle electrification.