Auto-industry supplier BorgWarner (NYSE:BWA) said that its net income fell 4.3% in the fourth quarter of 2019, to $220 million, as it was able to largely offset the effects of a slowdown in commercial-vehicle demand with stronger demand for light-vehicle parts and better-than-expected demand for diesel engines in Europe.
Excluding one-time items, BorgWarner earned $1.17 per share in the fourth quarter, down from $1.21 per share a year ago but well ahead of analysts' consensus estimate of $1.02. Revenue of $2.56 billion was roughly flat but exceeded Wall Street's $2.49 billion estimate.
The company also gave cautiously upbeat guidance for 2020.
The raw numbers
|Metric||Q4 2019||Change vs. Q4 2018||2019||Change vs. 2018|
|Revenue||$2.559 billion||(0.6%)||$10.168 billion||(3.4%)|
|Operating income||$478 million||79.6%||$1.303 billion||9.5%|
|Adjusted operating income||$340 million||5.3%||$1.232 billion||(4.9%)|
|Adjusted operating margin||13.3%||0.8 pp||12.1%||(0.2 pp)|
|Net income||$220 million||(4.3%)||$746 million||(19.9%)|
|Adjusted free cash flow||$221 million||(47.1%)||$699 million||20.5%|
What happened at BorgWarner in the fourth quarter?
- BorgWarner finished 2019 with revenue growth, adjusted earnings per share, and free cash flow all coming in above its guidance for the year.
- Net sales in the company's engine segment were $1.53 billion in the fourth quarter, down slightly from $1.54 billion a year ago. But excluding the impact of exchange-rate movements and the sale of its thermostat product line, the segment's net sales were up 3.5% from the year-ago period, and its adjusted earnings before interest and tax increased 11.2% to $264 million.
- Growth in the engine segment, powered by strong results in Europe and China, was somewhat offset by lower industry volumes in North America. In particular, stronger-than-expected demand for diesel engines in Europe helped.
- Net sales in the drivetrain segment were $1.04 billion, down slightly from $1.05 billion a year ago. Here again, excluding the impact of currency swings, sales were up 1.5% and adjusted EBIT increased 7.7% to $136 million.
- Growth in drivetrains was powered by higher sales in China and lower costs year over year, offset somewhat by lower industry volumes in North America.
Looking ahead: Guidance for 2020
- Net sales between $9.75 billion and $10.08 billion.
- Operating margin between 11% and 11.5%.
- Free cash flow between $675 million and $725 million.