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Why Shares of BorgWarner Are Up Today

By John Rosevear - Apr 6, 2020 at 1:01PM

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The closer we get to reopening auto plants, the better for BorgWarner.

What happened

Shares of auto-industry supplier BorgWarner (BWA 2.10%) were rising on Monday amid a broad-based rally as investors saw signs that the economic impact of the coronavirus pandemic might not be quite as severe as feared. 

As of 1:30 p.m. EDT today, BorgWarner's shares were up about 14.5% from Friday's closing price. 

BorgWarner's headquarters building in Auburn Hills, Michigan.

Image source: BorgWarner.

So what

As auto investors know, the prospects (and stock prices) of big auto suppliers like BorgWarner tend to rise and fall with those of the overall auto industry. Right now, with most automakers' factories in the U.S. and Europe shut down due to the COVID-19 pandemic, BorgWarner isn't shipping many parts, and it isn't generating much revenue.

That's not good, obviously, and it's most of the reason the company's share price has fallen over 40% since Jan. 1. 

BWA Chart

BWA data by YCharts.

But if the strict social-distancing measures in place in most U.S. states and Canada are starting to bring the pandemic under control, then it's possible that things will be back to "normal" before the end of the year.

A less-bad-than-feared economy also makes it more likely that BorgWarner's acquisition of rival Delphi Technologies (DLPH) -- which was called into question last week after Delphi drew down its line of credit without asking BorgWarner first -- will proceed. And that would be good news for both companies' stocks.

Now what 

Investors will have to wait a few more weeks for a full update from BorgWarner's management. The company is scheduled to report its first-quarter earnings before the market opens on May 6. 

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Stocks Mentioned

BorgWarner Inc. Stock Quote
BorgWarner Inc.
BWA
$34.07 (2.10%) $0.70
Delphi Technologies PLC Stock Quote
Delphi Technologies PLC
DLPH

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