Tic-tac-toe, investors want to know: After beating analyst consensus estimates in each of the last two quarters, can BorgWarner's (NYSE:BWA) latest results make it three in a row? We find out on Thursday, when the auto parts maker reports its second-quarter numbers.

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 (NYSE:WB), in which he spoke optimistically about the company's future. There, he argued that "Consumers now consider fuel economy the major factor in their buying decisions" [emphasis added, and I might also add that General Motors' (NYSE:GM) Hummer buyers might beg to differ on this point]. Manganello predicted rising global demand for BorgWarner's emissions products in general, and its turbo chargers (which increase horsepower in smaller engines) in particular. For the record, this echoes comments in last quarter's earnings release.

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 (NASDAQ:NSANY), Toyota (NYSE:TM), and Honda (NYSE:HMC) as well. Second, in a market in which U.S. vehicle production declined 8% year over year last quarter, BorgWarner's U.S. sales fell only 5%. Clear numerical proof that even as it's not immune to the U.S. slowdown, BorgWarner is grabbing market share in the midst of it.

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.





























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 (NYSE:MGA) and Cummins (NYSE:CMI). Looking at Borg's stock price just a month later, the Stock Advisor team agreed: "This is a great company that seems to execute on every part of its business plan ... but the rise in price makes us cautious about adding to the position."

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.

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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.