BorgWarner Reports Third Quarter 2024 Results; Increases Full-Year Adjusted Operating Margin and EPS Guidance; Completes $400 Million Share Repurchase Plan
AUBURN HILLS, Mich., Oct. 31, 2024 /PRNewswire/ -- BorgWarner Inc. (NYSE:BWA) today reported third quarter results.
Third Quarter and 2024 Guidance Update
BorgWarner achieved an adjusted operating margin of 10.1% during the third quarter, which equated to a U.S. GAAP operating margin of 7.8%. The Company also generated net cash provided by operating activities of $356 million or $201 million in free cash flow, despite a 5.6% decline in the Company's weighted light and commercial vehicle markets.
The Company increased the midpoint of its full year adjusted operating margin guidance by 20 basis points and adjusted earnings per share guidance by approximately $0.18 or 4% per diluted share. This increase is being driven by strong third quarter operational performance, continued cost controls, a lower effective tax rate, and the Company's third quarter share repurchases. The Company reduced its full year mid-point net sales guidance by $150 million primarily due to a lower market production outlook.
BorgWarner completed the repurchase of $300 million of the Company's outstanding shares during the third quarter. BorgWarner has now repurchased $400 million of its outstanding shares during 2024.
New Business UpdateThe Company secured multiple new business awards that are expected to support its future long-term profitable growth including:
Two transfer case awards with a major North American OEM for their next generation full-size pickup trucks. This business is expected to launch in 2027 and 2028.
Three high-voltage coolant heater awards with a Chinese electric vehicle OEM, a Korean OEM and a Japanese OEM. This business is expected to launch in 2025, 2025 and 2028, respectively.
A General Motors turbocharger award for use on their Corvette ZR1 sports car platform. This is expected to be the largest passenger car twin turbochargers on the market.
Third Quarter Highlights (continuing operations basis):
U.S. GAAP net sales of $3,449 million, a decrease of approximately 5% compared with third quarter 2023.
Excluding the impact of foreign currencies and the impact of net M&A, organic sales declined 5.1% compared with third quarter 2023.
U.S. GAAP net earnings of $1.08 per diluted share.
Excluding $(0.01) of net gains per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $1.09 per diluted share.
U.S. GAAP operating income of $270 million, or 7.8% of net sales.
Excluding $80 million of pretax expenses related to non-comparable items, adjusted operating income was $350 million, or 10.1% of net sales.
Net cash provided by operating activities of $356 million.
Free cash flow of $201 million.
Financial Results (continuing operations basis):The Company believes the following table is useful in highlighting non-comparable items that impacted its U.S. GAAP net earnings per diluted share. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for the periods presented. The Company defines adjusted earnings per diluted share as earnings per diluted share adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, other gains and losses not reflective of the Company's ongoing operations, and related tax effects.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Earnings per diluted share
$ 1.08
$ 0.37
$ 3.40
$ 2.06
Non-comparable items:
Restructuring expense
0.07
0.17
0.21
0.21
Accelerated depreciation
0.10
—
0.13
0.01
Commercial contract settlement
0.02
—
0.06
—
Adjustments associated with Spin-Off related balances
0.01
—
0.06
—
Loss (gain) on sale of businesses
0.03
—
0.02
(0.02)
Collective bargaining agreement ratification bonus
0.01
—
0.01
—
Gain on debt extinguishment
(0.01)
(0.09)
(0.01)
(0.09)
Merger and acquisition expense, net
(0.02)
0.01
—
0.07
Asset impairment and lease modification
—
—
—
0.03
Gain on sale of assets
—
(0.03)
—
(0.04)
Unrealized and realized (gain) loss on equity and debt securities
(0.01)
0.32
—
0.55
Corporate synergy from Spin-Off
—
—
—
0.03
Tax adjustments
(0.23)
0.18
(0.65)
—
Other non-comparable items
0.04
0.05
0.07
0.03
Adjusted earnings per diluted share
$ 1.09
$ 0.98
$ 3.30
$ 2.84
Net sales were $3,449 million for the third quarter 2024, a decrease of approximately 5% compared with the third quarter 2023, primarily due to declining market production volumes. Net earnings for the third quarter 2024 were $242 million, or $1.08 per diluted share, compared with net earnings of $87 million, or $0.37 per diluted share for the third quarter 2023. Adjusted net earnings per diluted share for the third quarter 2024 were $1.09, up from adjusted net earnings per diluted share of $0.98 for the third quarter 2023. Adjusted net earnings for the third quarter 2024 excluded net non-comparable items of $(0.01) per diluted share, while adjusted net earnings for the third quarter 2023 excluded net non-comparable items of $(0.61) per diluted share. These items are listed in the table above, which is provided by the Company for comparison with other results and the most directly comparable U.S. GAAP measures. The increase in adjusted net earnings per diluted share was primarily due to strong operational performance, continued cost controls, customer recoveries, a lower effective tax rate, and the Company's share repurchases.
Full Year 2024 Guidance: The Company has updated full year sales, margin, and EPS guidance. Net sales for 2024 are expected to be in the range of $14.0 billion to $14.2 billion, compared to the Company's prior guidance of $14.1 billion to $14.4 billion and 2023 sales of approximately $14.2 billion. The Company expects its weighted light and commercial vehicle markets to be in the range of down 3.5% to down 3% year-over-year in 2024, a decrease from the Company's prior guidance of down 3% to down 2%. The Company's sales guidance implies a year-over-year decrease in organic sales of approximately (1.5)% to flat, or estimated outgrowth above market production of approximately 200 to 300 basis points. The Company expects its 2024 eProduct sales to be approximately $2.4 billion, up from approximately $2.0 billion in 2023. Foreign currencies are expected to result in a year-over-year decrease in sales of approximately $20 million primarily due to strengthening of the Euro, offset by the weakening of the Korean Won and Chinese Renminbi against the U.S. dollar. The acquisitions of SSE and the Electric Hybrid Systems business segment of Eldor Corporation are expected to increase year-over-year sales by approximately $30 million.
Operating margin for the full year is expected to be in the range of 8.1% to 8.2%. Excluding the impact of non-comparable items, adjusted operating margin is expected to be in the range of 9.8% to 10.0%, up from the Company's prior guidance of 9.6% to 9.8%. Net earnings are expected to be within a range of $4.17 to $4.28 per diluted share. Excluding the impact of non-comparable items, adjusted net earnings are expected to be in the range of $4.15 to $4.30 per diluted share, up from the Company's prior guidance of $3.95 to $4.15 per diluted share. Full-year operating cash flow is expected to be in the range of $1,325 million to $1,375 million, while free cash flow is expected to be in the range of $475 million to $575 million.
At 9:30 a.m. ET today, a brief conference call concerning third quarter 2024 results and guidance will be webcast at: https://www.borgwarner.com/investors. Additionally, an earnings call presentation will be available at https://www.borgwarner.com/investors.
For more than 130 years, BorgWarner Inc. (NYSE:BWA) has been a transformative global product leader bringing successful mobility innovation to market. Today, we're accelerating the world's transition to eMobility -- to help build a cleaner, healthier, safer future for all.
Forward Looking Statements: This release may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management's current outlook, expectations, estimates and projections. Words such as "anticipates," "believes," "continues," "could," "designed," "effect," "estimates," "evaluates," "expects," "forecasts," "goal," "guidance," "initiative," "intends," "may," "outlook," "plans," "potential," "predicts," "project," "pursue," "seek," "should ," "target," "when," "will," "would," and variations of such words and similar expressions are intended to identify such forward-looking statements. Further, all statements, other than statements of historical fact, contained or incorporated by reference in this release that we expect or anticipate will or may occur in the future regarding our financial position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements. Accounting estimates, such as those described under the heading "Critical Accounting Policies and Estimates" in Item 7 of our most recently filed Annual Report on Form 10-K ("Form 10-K"), are inherently forward-looking. All forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. Forward-looking statements are not guarantees of performance, and the Company's actual results may differ materially from those expressed, projected or implied in or by the forward-looking statements.
You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. These risks and uncertainties, among others, include: supply disruptions impacting us or our customers, commodity availability and pricing, and an inability to achieve expected levels of recoverability in commercial negotiations with customers concerning these costs; competitive challenges from existing and new competitors, including original equipment manufacturer ("OEM") customers; the challenges associated with rapidly changing technologies, particularly as they relate to electric vehicles, and our ability to innovate in response; the difficulty in forecasting demand for electric vehicles and our electric vehicles revenue growth; potential disruptions in the global economy caused by wars or other geopolitical conflicts; the ability to identify targets and consummate acquisitions on acceptable terms; failure to realize the expected benefits of acquisitions on a timely basis; the possibility that our 2023 tax-free spin-off of our former Fuel Systems and Aftermarket segments into a separate publicly traded company will not achieve its intended benefits; the failure to promptly and effectively integrate acquired businesses; the potential for unknown or inestimable liabilities relating to the acquired businesses; our dependence on automotive and truck production, which is highly cyclical and subject to disruptions; our reliance on major OEM customers; impacts of any future strikes involving any of our OEM customers and any actions such OEM customers take in response; fluctuations in interest rates and foreign currency exchange rates; our dependence on information systems; the uncertainty of the global economic environment; the outcome of existing or any future legal proceedings, including litigation with respect to various claims, or governmental investigations, including related litigation; future changes in laws and regulations, including, by way of example, taxes and tariffs, in the countries in which we operate; impacts from any potential future acquisition or disposition transactions; and the other risks noted in reports that we file with the Securities and Exchange Commission, including Item 1A, "Risk Factors" in our most recently filed Form 10-K and/or Quarterly Report on Form 10-Q. We do not undertake any obligation to update or announce publicly any updates to or revisions to any of the forward-looking statements in this release to reflect any change in our expectations or any change in events, conditions, circumstances, or assumptions underlying the statements.
BorgWarner Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in millions, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Net sales
$ 3,449
$ 3,622
$ 10,647
$ 10,676
Cost of sales
2,813
2,970
8,682
8,767
Gross profit
636
652
1,965
1,909
Gross margin
18.4 %
18.0 %
18.5 %
17.9 %
Selling, general and administrative expenses
340
330
1,010
963
Restructuring expense
21
56
65
68
Other operating expense (income), net
5
(6)
28
(1)
Operating income
270
272
862
879
Equity in affiliates' earnings, net of tax
(6)
(10)
(23)
(23)
Unrealized and realized (gain) loss on equity and debt securities
(2)
60
—
129
Interest expense (income), net
4
(19)
17
3
Other postretirement expense
4
3
10
8
Earnings from continuing operations before income taxes and noncontrolling interest
270
238
858
762
Provision for income taxes
13
133
44
230
Net earnings from continuing operations
257
105
814
532
Net loss from discontinued operations
(8)
(37)
(27)
(12)
Net earnings
249
68
787
520
Net earnings from continuing operations attributable to noncontrolling interest
15
18
44
49
Net earnings attributable to BorgWarner Inc.
$ 234
$ 50
$ 743
$ 471
Amounts attributable to BorgWarner Inc.:
Net earnings from continuing operations
$ 242
$ 87
$ 770
$ 483
Net loss from discontinued operations
(8)
(37)
(27)
(12)
Net earnings attributable to BorgWarner Inc.
$ 234
$ 50
$ 743
$ 471
Earnings per share from continuing operations, basic
$ 1.08
$ 0.37
$ 3.41
$ 2.07
Loss per share from discontinued operations, basic
(0.04)
(0.16)
(0.12)
(0.05)
Earnings per share attributable to BorgWarner Inc., basic
$ 1.04
$ 0.21
$ 3.29
$ 2.02
Earnings per share from continuing operations, diluted
$ 1.08
$ 0.37
$ 3.40
$ 2.06
Loss per share from discontinued operations, diluted
(0.04)
(0.16)
(0.12)
(0.05)
Earnings per share attributable to BorgWarner Inc., diluted
$ 1.04
$ 0.21
$ 3.28
$ 2.01
Weighted average shares outstanding:
Basic
223.1
233.4
225.7
233.2
Diluted
224.5
235.3
226.8
234.6
BorgWarner Inc.
Net Sales by Reportable Segment (Unaudited)*
(in millions)
