BorgWarner Shares Tumble Despite Strong Q1 Sales, Expansion Plans For Seneca Facility Announced

BorgWarner Inc BWA reported first-quarter FY23 sales growth of 8% year-on-year to $4.18 billion, beating the consensus of $4.15 billion.

• Adjusted EPS of $1.09 (+3.8%) missed the analyst consensus of $1.11.
• While strength in Organic sales (+12%Y/Y) bolstered quarterly performance, the earnings miss was primarily owing to inflationary impacts on cost, higher R&D investment in the company's electrification portfolio, and the effect of lower industry production in China.
• Air Management segment sales, the most significant revenue contributor, totaled $1.98 billion (+11.9% Y/Y).
• Gross profit remained flat on year $750 million; gross margin contracted 150 basis points to 17.9%.
• The operating income decreased by 3.4% Y/Y to $340 million.
• BorgWarner held $950 million in cash and equivalents as of quarter-end. 
• The company plans to expand its Seneca, South Carolina production facility, which is expected to contribute to the growth of the company's battery module and pack production in the U.S.
• Dividend: On April 27, the company declared a quarterly cash dividend of $0.17 per share. The dividend is payable on June 15, 2023, to stockholders of record on June 1, 2023.
• Outlook: BorgWarner sees FY23 sales of $17.1 billion to $17.9 billion (prior view $16.7 billion -$17.5 billion) versus the Street view of $17.23 billion.
• The company expects FY23 adjusted EPS of $4.60 to $5.15 (previous view $4.50 - $5.00), against the consensus of $4.88.
• Electric vehicle sales in FY23 are expected to grow from $1.5 billion to $1.8 billion, up significantly from $870 million in 2022. 
• The company's total 2023 eProduct sales are expected to be between $2.3 billion and $2.6 billion.

Price Action: BWA shares are trading lower by 8.59% at $42.47 on the last check Thursday.

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