The shares of BorgWarner (BWA) have underperformed since my last update, trailing the S&P 500 by about 15%, but not performing too badly next to the wider auto supplier sector. The main issues are familiar ones to most readers – weak underlying light vehicle production on component shortages and margin pressures from both supply chain issues and the ongoing cost of developing new EV system components.
BorgWarner’s initial guidance for FY’22 was soft relative to the Street, but I believe management is taking a prudently cautious approach to initial guidance given the ongoing supply shortages and the lack of visibility on supply improvements. At the same time, the company has been building a good track record – beating quarterly expectations and already ahead of the company’s prior 2025 EV revenue target.
I continue to believe that BorgWarner is well-positioned to be one of the top suppliers of EV components in 2025 and beyond. With mid-single-digit revenue growth and mid-single-digit FCF margins on the way, I believe BorgWarner is meaningfully undervalued today and worth consideration ahead of a pickup in auto builds.
Read more here:
BorgWarner: Current Conditions Remain Challenging, But EV Business Is Ahead Of Plan
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