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Shares of BorgWarner Inc. traded on Thursday above the $50 mark for the first time in 13-months before paring gains, after the provider of automotive systems for combustion, hybrid and electric vehicles (EV) reported fourth-quarter profit and sales that rose above expectations, and said it expects “significantly” higher EV sales in 2023.
The company’s results and outlook led CFRA analyst Garrett Nelson to pound the table on the stock, which in Wall Street parlance means he highly recommends investors buy.
“We raise our rating to strong buy [from buy], liking the stock as an indirect play on EV growth,” Nelson wrote in a note to clients.
He lifted his stock price target to $65 from $50, with the new target implying about 35% upside from current levels.
The upgrade comes after the company indicated that in 2023, EV sales could rise to nearly 10% of total sales, from under 6% in 2022.
BorgWarner’s stock
BWA,
charged up as much as 8.9% to an intraday high of $50.79 before paring gains to be up 3.3% in afternoon trading.
The company reported before Thursday’s open net income that rose to $255 million, or $1.09 a share, from $129 million, or 54 cents a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of $1.26 beat the FactSet consensus of $1.08.
Sales grew 12.4% to $4.11 billion, above the FactSet consensus of $3.90 billion. Air management sales increased 10.2% to $1.80 billion, e-propulsion and drivetrain sales jumped 18.0% to $1.53 billion and fuel systems sales rose 10.6% to $607 million.
Cost of sales rose less than sales, up 8.1% to $3.28 billion, as gross margin improved to 20.3% from 17.1%.
For 2023, the company expects adjusted EPS of $4.50 to $5.00 and revenue of $16.7 billion to $17.5 billion, which compared with the FactSet consensus for EPS of $4.90 and sales of $16.7 billion. In 2022, the company recorded adjusted EPS of $4.60 and sales of $15.80 billion.
The company expects 2023 EV sales to rise to $1.5 billion to $1.8 billion from $870 million in 2022.
At the midpoints of 2023 guidance, EV sales would make up 9.65% of total sales, compared with 5.51% of 2022 sales.
Separately, BorgWarner announced Thursday the expansion of its silicon-carbide (SiC) inverter business with a “major global OEM,” or original equipment manufacturer. The company said the inverters are destined for battery electric vehicle (BEV) platforms.
The company also announced an agreement to supply a “major German vehicle manufacturer” in the Europe and the U.S. with battery cooling plates destined for the automaker’s electric vehicles.
The stock has soared 24.9% over the past three months while the S&P 500
SPX,
has gained 9.1%.
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