Tic-tac-toe, investors want to know: After beating analyst consensus estimates in each of the last two quarters, can BorgWarner's
What analysts say:
- Buy, sell, or waffle? Fifteen analysts now follow BorgWarner. X rate it a buy. Two times X rate it a hold. Solve for X.
- Revenues. On average, the analysts expect 8% sales growth to $1.26 billion.
- Earnings. Profits are predicted to rise 7% to $1.29 per share.
What management says:
Late last month, CEO Timothy Manganello gave a talk at an analyst conference hosted by Wachovia
Speaking of last quarter's news, investors might take note of a couple points that Manganello made relevant to the declining production of U.S. automakers. First and foremost, he emphasized the global scope of BorgWarner's business, in which it sells not just to the Detroit Big 3, but to their rivals such as Nissan
What management does:
Higher raw material costs continue to depress gross margins at BorgWarner, with effects that cascade down the income statement. Last quarter, in particular, the company suffered additional costs in the form of higher warranty costs on a single product (not identified) that is no longer in production. These costs further depressed operating and net margins.
12/05 |
3/06 |
6/06 |
9/06 |
12/06 |
3/07 |
|
---|---|---|---|---|---|---|
Gross |
19.9% |
19.8% |
19.5% |
18.9% |
18.5% |
17.9% |
Operating |
9.2% |
9.5% |
9.4% |
9.0% |
8.5% |
8.1% |
Net |
5.6% |
5.1% |
5.8% |
5.3% |
4.6% |
4.4% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
Reviewing BorgWarner's performance in his semiannual rundown of all active stock picks on his side of the Motley Fool Stock Advisor portfolio in May, Tom Gardner echoed my own thoughts on the company, expressed in last quarter's Foolish Forecast. Back then, I had argued that while I like the company, Borg's stock was looking a mite pricey relative to rivals such as Magna
The stock has added another 30% worth of profits to our original recommendation price since, and that suggests that BorgWarner is even less of a bargain today. That said, there's a big difference between the stock and the company. I wouldn't be at all surprised to see Borg assimilate even more market share, and profits, in tomorrow's news.
Track the Borg's progress with:
- Foolish Forecast: Borg's Back
- Foolish Forecast: Can Borg Bounce Back?
- Resisting BorgWarner Is Futile: Fool by Numbers
What other stocks are at the top of Tom and David Gardner's list? Be our guest at the Stock Advisor website for 30 days and find out.
Fool contributor Rich Smith does not own shares of any company named above. Nissan is a Global Gains selection. The Motley Fool has a disclosure policy.