An analyst sees good growth prospects for BorgWarner Inc. (BWA)

BorgWarner Inc. (NYSE: BWA) stock fell -3.38% on Friday to $35.19 against a previous-day closing price of $36.42. With 2.05 million shares changed hands, the volume of the stock remained heavier than its average volume of 1.78 million shares. During the session, the Auto Parts company that operates in wider Consumer Cyclical sector, reached to the highest price of $36.62 whereas the lowest price it dropped to was $35.19. The 52-week range on BWA shows that it touched its highest point at $50.09 and its lowest point at $32.28 during that stretch. It currently has a 1-year price target of $47.04. With its current market cap of 8.36 billion, BWA has annualized dividend of $0.68 while the current yield stands at 1.93%. Beta for the stock currently stands at 1.37.

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Price Performance and Earnings:

Stock performance is one of the indicators that investors use to determine whether they will profit from a stock. The price performance of BWA was down-trending over the past week, with a drop of -5.10%, but this was down by -4.09% over a month. Three-month performance dropped to -0.45% while six-month performance fell -8.48%. The stock lost -15.33% in the past year, while it has lost -21.92% so far this year. A look at the trailing 12-month EPS for BWA yields 2.68 with Next year EPS estimates of 5.08. For the next quarter, that number is 1.03. This implies an EPS growth rate of -4.00% for this year and 19.19% for next year. EPS is expected to grow by 20.43% annually over the next five years; however, over the past five years, the company experienced an annual growth rate of -4.10%.

Float and Shares Shorts:

At present, 236.90 million BWA shares are outstanding with a float of 235.58 million shares on hand for trading. On Aug 30, 2022, short shares totaled 6.43 million, which was 2.72% higher than short shares on Jul 28, 2022. In addition to Mr. Frederic B. Lissalde as the firm’s Pres, CEO & Director, Mr. Kevin A. Nowlan serves as its Exec. VP & CFO.

Institutional Ownership:

Through their ownership of 97.19% of BWA’s outstanding shares, institutional investors have majority control over the company. Other institutions hold 57.77% of BWA, in contrast to 38.58% held by mutual funds. Shares owned by individuals account for 2.78%. As the largest shareholder in BWA with 10.77% of the stake, The Vanguard Group, Inc. holds 25,496,319 shares worth 25,496,319. A second-largest stockholder of BWA, BlackRock Fund Advisors, holds 13,129,666 shares, controlling over 5.54% of the firm’s shares. Harris Associates LP is the third largest shareholder in BWA, holding 11,648,608 shares or 4.92% stake. With a 3.03% stake in BWA, the Victory Sycamore Established Valu is the largest stakeholder. A total of 7,175,000 shares are owned by the mutual fund manager. The Vanguard Total Stock Market Index, which owns about 2.99% of BWA stock, is the second-largest Mutual Fund holder. It holds 7,077,394 shares valued at 266.82 million. Oakmark Fund holds 2.75% of the stake in BWA, owning 6,500,000 shares worth 245.05 million.

An Overview of Recent Financials:

Understanding a company as a customer does not mean you will understand it as an investor. The wise investor uses quantitative research to analyze metrics such as revenue, net income, and earnings. In its fiscal quarter reported on Jun 29, 2022, BWA reported revenue of $3.76B and operating income of $313.00M. Over the past year, revenue came in at $14.70B while operating income stood at $1.05B. It generated $216.00M net income for the quarter, which came to $641.00M over the last twelve months. The EBITDA in the recently reported quarter was $514.00M and diluted EPS was $0.91. EBITDA for the full year was $2.10B.

Analysts Ratings:

Reading analyst opinions is an effective way to decide where to invest, and there are several opinions available for BWA since 20 analysts follow the stock currently. There are 8 analysts who recommend BUY ratings, while 1 suggest SELL ratings. Of the remaining analysts, 9 believe that the stock is worth HOLDING, 2 give it an OVERWEIGHT rating, and 0 thinks that it’s UNDERWEIGHT. In the same way, a target price assigned to a stock can also reveal much about its potential. With BWA analysts setting a high price target of $75.00 and a low target of $32.00, the average target price over the next 12 months is $47.41. Based on these targets, BWA could surge 113.13% to reach the target high and fall by -9.07% to reach the target low. Reaching the average price target will result in a growth of 34.73% from current levels.

EPS: Estimates vs Actual

It is also common to use earnings estimates to evaluate a firm’s growth potential and to determine trading strategy. BWA will report FY 2022 earnings on 02/14/2023. Analysts have provided yearly estimates in a range of $4.58 being high and $4.11 being low. For BWA, this leads to a yearly average estimate of $4.28. The earnings surprise of a firm occurs when the actual results change from the consensus earnings estimate. BorgWarner Inc. surprised analysts by $0.19 when it reported $1.05 EPS against a consensus estimate of $0.86. The surprise factor in the prior quarter was $0.16. Based on analyst estimates, the high estimate for the next quarter is $1.16 and the low estimate is $0.94. The average estimate for the next quarter is thus $1.04.

Summary of Insider Activity:

Insiders traded BWA stock several times over the past three months with 0 Buys and 1 Sells. In these transactions, 0 shares were bought while 858 shares were sold. The number of buy transactions has increased to 29 while that of sell transactions has risen to 33 over the past year. The total number of shares bought during that period was 423,589 while 119,650 shares were sold.

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