BorgWarner Faces Challenges Amid Market Shifts
Despite its solid footing in the automotive supply sector, BorgWarner (BWA) encounters headwinds as competition rises and production dips.
BorgWarner Inc. (BWA), based in Auburn Hills, Michigan, is a major player in the automotive supply industry, delivering solutions for combustion, hybrid, and electric vehicles. With a market cap of $7 billion, the company serves original equipment manufacturers (OEMs) across various light vehicles like passenger cars, SUVs, vans, and light trucks, as well as commercial vehicles such as medium and heavy-duty trucks and buses.
BWA falls into the “mid-cap stock” category, characterized by companies worth $2 billion or more. Its market cap indicates a significant presence in the auto parts industry, showcasing both size and influence. The company emphasizes electrification and boasts a diverse product range supported by strong research and development capabilities, bolstering its competitive advantage.
However, BWA has seen a decline in stock value. The shares dropped 15.8% from their 52-week high of $38.23, reached on May 14. Over the last three months, the stock experienced a 12.4% decrease, lagging behind the Nasdaq Composite’s ($NASX) 8.8% gains during the same period.
Long-term trends reveal a slight rise in BWA shares over the past six months; however, they are down 10.2% over the past year. In contrast, the Nasdaq has seen a 10.4% increase over six months and a notable 30.6% rise over the past year.
The bearish outlook is further supported by the stock trading below its 50-day and 200-day moving averages since mid-December, an indication of a downward trend.
Several factors contribute to BWA’s underperformance. A fall in vehicle production has occurred, driven by reduced consumer demand, ongoing inflation challenges, and stiff competition from Chinese manufacturers offering cheaper electric vehicles.
On Oct. 31, after BWA reported its Q3 earnings, shares saw a slight uptick. Total revenues stood at $3.45 billion, which fell short of analyst expectations of $3.53 billion. However, the adjusted earnings per share (EPS) of $1.09 exceeded predictions of $0.92. BWA anticipates full-year adjusted EPS between $4.15 and $4.30 and expects total revenue to range from $14 billion to $14.2 billion.
American Axle & Manufacturing Holdings, Inc. (AXL), a competitor of BWA, has not fared well either, registering a 15.1% decline over the past six months and a steep 34.4% drop in the last year.
Analysts on Wall Street remain cautiously optimistic about BWA’s future. The stock holds a consensus “Moderate Buy” rating among the 17 analysts tracking it, with a mean price target of $40.81, suggesting a potential upside of 26.8% from its current levels.
On the date of publication, Neha Panjwani did not hold positions in any of the mentioned securities. This article’s content is for informational purposes only. For further details, please see the Barchart Disclosure Policy here.
The views presented here belong to the author and do not necessarily represent those of Nasdaq, Inc.
