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BorgWarner (BWA) - Outperform

|Includes:BorgWarner Inc. (BWA)

BorgWarner Inc (NYSE:BWA)     12/02/2010     Outperform

 

Price: $65.27  12/2/10

Market Cap: $7.2 bil

Book Value: $20.26/share

Price to Book: 3.22

Annual Sales: $5.3 bil

Profit: $318.4 mil

Profit/share: $2.80

Expected Profit/share: $3.36

PE: 24.66

Dividend: 0

Yield: 0%

Debt: $1.0 bil

 

Company Profile

BorgWarner Inc. is a product leader in highly engineered components and systems for vehicle powertrain applications worldwide. The company operates manufacturing and technical facilities in several countries. Customers include Ford, DaimlerChrysler, General Motors, Toyota, Caterpillar, Navistar, PSA and VW Group. (Company Press Release)

 

Reason for Outperform Rating:

Auto sales are showing a stronger than expected recovery in recent months.  BorgWarner is the world leader in manufacturing fuel efficient drive train and engine components.  Countries world-wide are imposing new fuel efficiency standards for passenger automobiles.  I see this as a positive for BWA's future earnings.  Although the stock has had a recent run up in price I see a long-term opportunity for increased earnings and PE expansion.  BWA is currently trading at approximately 16 times next years earnings.  I recently wrote favorably about the company on Seeking Alpha's Instablog.  The article can be found at seekingalpha.com/instablog/722971-auditt...

 

Risks

Although BorgWarner has a large global presence, including emerging markets, another downturn in US auto sales would negatively impact future earnings and therefore stock price.  Rising fuel costs are not a risk for BorgWarner since this drives more people to choose fuel efficient vehicles.  This would only be a risk if there was a large price spike in gasoline that caused a decrease in auto sales.

 

Recent News

BorgWarner Shares Turbocharged

http://www.thestreet.com/_yahoo/story/10936978/1/borgwarner-shares-turbocharged.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

 

BorgWarner Introduces New Series of Turbochargers for Aftermarket Performance Customers

http://finance.yahoo.com/news/BorgWarner-Introduces-New-prnews-1677029383.html?x=0&.v=1

 

BorgWarner's New EFR Turbochargers Boost 2011 LMP2 Engine and CR-Z Hybrid Race Car for Honda Performance Development

http://finance.yahoo.com/news/BorgWarners-New-EFR-prnews-2984902360.html?x=0&.v=1

 

BorgWarner's Variable Cam Timing with Mid Position Lock Named 2011 Automotive News PACE Award Finalist

http://finance.yahoo.com/news/BorgWarners-Variable-Cam-prnews-439843759.html?x=0&.v=1

 

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Disclosure: Long BWA
Stocks: BWA