BorgWarner posts strong profit, reaffirms 2013 outlook

DETROIT Thu Apr 25, 2013 11:02am EDT

DETROIT (Reuters) - BorgWarner Inc (BWA.N), which makes automotive turbochargers and emissions systems, posted higher-than-expected operating profit on Thursday as both of its businesses topped forecasts, and the company reaffirmed its full-year financial outlook.

"The focus on fuel economy and improved emissions continued to drive growth for BorgWarner in most parts of the world, but sharp declines in light vehicle production in Europe, a market that comprises nearly half of our sales, more than offset this growth," Chief Executive James Verrier said in a statement.

Morgan Stanley analyst Ravi Shanker said investors would likely be relieved by the full-year outlook, given the weakness in Europe, where industry vehicle production in the first quarter fell 9 percent.

Shanker also cited the auto supplier's strong operating margin of 11.7 percent. Those positives "should leave Borg with a lot of room to beat modest consensus expectations as the production rate steps up and (comparisons) get easier in the back half of the year," he said in a research note.

Net earnings in the first quarter attributable to the company declined to $142 million, or $1.22 a share, from $163 million, or $1.28 a share, a year earlier.

Excluding one-time items, BorgWarner earned $1.30 a share, 6 cents better than the average forecast of analysts polled by Thomson Reuters I/B/E/S. Foreign exchange reduced earnings by 3 cents a share, and Shanker said a lower-than-expected share count aided the outperformance by 2 cents.

Sales fell 3 percent to $1.85 billion due to sharp production declines in Europe. Analysts had expected $1.83 billion. Excluding the impact of foreign currencies and dispositions, sales fell 1 percent.

Sales in the company's engine group business were down 3.8 percent to $1.26 billion, while operating income declined by about the same rate to $202 million. However, both of those results were above what Shanker had forecast.

The drivetrain group's sales of $601 million came up short of Shanker's estimate, but the $56 million operating income topped expectations.

BorgWarner said its outlook for the year is unchanged. It still expects sales to grow 2 percent to 6 percent, while net earnings per share, excluding one-time items, should be $5.15 to $5.45. Analysts have been expecting full-year sales of $7.46 billion and earnings of $5.29 a share.

The Auburn Hills, Michigan-based company is one of the biggest suppliers of turbocharging technology, which has been increasingly used by automakers, including Ford Motor Co (F.N) and Hyundai Motor Co (005380.KS), to boost fuel economy and meet upcoming federal standards for fuel mileage.

BorgWarner shares were up 2 percent at $76.68 in morning trading on the New York Stock Exchange.

(Reporting by Ben Klayman in Detroit; Editing by Gerald E. McCormick and John Wallace)

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