Look Past The Current Auto Weakness, And BorgWarner Has Investment Appeal

These aren’t great times for the auto sector, with U.S. auto sales down more than 5% in April, European registrations down 4% in March, and Chinese auto sales down 11% in the first quart of 2019. Against that backdrop, it’s not really surprising that BorgWarner (BWA) is seeing revenue and margin contraction.

Looking out further, though, BorgWarner’s backlog suggests that the company’s leverage to hybrids and EVs is increasing as expected, and while there is still uncertainty as to what the margins on that business will look like, I believe today’s price discounts an excessively pessimistic view. The numbers probably won’t start looking better for BorgWarner until the second half of 2019, and there is still some risk there, but I think longer-term investors may want to dig in and do their due diligence on this underrated powertrain player.

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Look Past The Current Auto Weakness, And BorgWarner Has Investment Appeal