UPDATE 3-BorgWarner raises outlook, shares surge

* Q1 EPS ex-items 65 cents vs Wall St view 41 cents

* Raises 2010 EPS forecast by 50 pct to $2.20 to $2.50

* Sees 2010 revenue growth of as much as 32 percent

* Shares up 9.3 percent (Adds CEO comment, link to Tenneco earnings, analyst remarks)

By Soyoung Kim

DETROIT, April 29 (Reuters) - Auto parts maker BorgWarner Inc BWA.N boosted its 2010 earnings outlook after posting a stronger-than-expected quarterly profit, propelled by improving industry production and rising demand for fuel-saving components such as turbochargers.

BorgWarner, whose shares rose 9.3 percent on Thursday, raised its 2010 earnings forecast by about 50 percent to a range of $2.20 to $2.50 per share, above Wall Street’s average estimate of $1.74.

The company also forecast revenue growth of 28 percent to 32 percent in 2010, up from its earlier range of 15 percent to 19 percent. Analysts on average expect sales to increase 23 percent to $4.9 billion, according to Thomson Reuters I/B/E/S.

“Our improved outlook for the company in 2010 reflects our view that volumes will continue to recover and that we we’ll continue to deliver outstanding operating performance throughout this year,” Chief Executive Officer Tim Manganello said on a conference call with analysts.

“Longer term, the demand for our technology continues to gain momentum... We expect this to continue for years to come,” he said.

Like other U.S. auto parts suppliers, BorgWarner is benefiting from big cost reductions over the past year as U.S. vehicle production volumes recover from their worst downturn since the recession of the early 1980s.

On Thursday, Tenneco Inc TEN.N, a maker of emission control and ride control systems, also posted a quarterly profit that exceeded Wall Street expectations, sending its shares 5 percent higher. [ID:nN29178475]

BorgWarner’s focus on components that can improve fuel economy and performance place it in a growth area of the auto industry, with carmakers aiming to meet stricter mileage and emissions standards over the next several years.

“While many companies have upgraded guidance, the magnitude of BorgWarner’s guidance is undeniably stronger than those reported so far,” JPMorgan analyst Himanshu Patel said.

Analysts say BorgWarner is uniquely positioned to benefit from rising demand for more efficient gasoline engines and cleaner-burning diesel cars as automakers race to achieve the 42 percent increase in fuel efficiency mandated by the U.S. government for 2016.

Shares of BorgWarner were up $3.73, or 9.34 percent, to $43.68 in morning trade on the New York Stock Exchange.

BorgWarner reported first-quarter net income of $76.2 million, or 63 cents per share, compared with a year-earlier loss of $7 million, or 6 cents per share.

Sales rose 57 percent to $1.29 billion.

Excluding one-time items, BorgWarner earned 65 cents per share. On that basis, analysts on average had expected profit of 41 cents per share on sales of $1.2 billion.

Separately, Tenneco posted net income of $7 million for the first quarter, or 11 cents per share, compared with a loss of $49 million, or $1.05 per share, a year earlier.

Shares of Tenneco were up $1.52, or 6.2 percent, to $26.19 on the New York Stock Exchange. (Reporting by Soyoung Kim, editing by Dave Zimmerman, Lisa Von Ahn and Robert MacMillan)