BorgWarner Invest While it’s Cheap and Hot!
Description courtesy of Reuters:
BorgWarner Inc. (BWA) is engaged in providing technology solutions for combustion, hybrid and electric vehicles. The Company's segments include Engine and Drivetrain. The Engine segment's products include turbochargers, timing devices and chains, emissions systems and thermal systems.
The Engine segment develops and manufactures products for gasoline and diesel engines, and alternative powertrains.
The Drivetrain segment's products include transmission components and systems, all-wheel drive (AWD) torque transfer systems and rotating electrical devices.
The Company's products are manufactured and sold across the world, primarily to original equipment manufacturers (OEMs) of light vehicles (passenger cars, sport-utility vehicles (SUVs), vans and light trucks).
The Company's products are also sold to other OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications.
Investment Thesis 04/27/2017 courtesy of MorningStar:
“BorgWarner is well-positioned to capitalize on industry trends arising from global clean air legislation, consumers' demand for fuel economy, and the popularity of sport utility and cross-over vehicles around the world. The company benefits from its ability to continuously innovate, a global manufacturing footprint, highly integrated long-term customer ties, high customer switching costs, and moderate pricing power from new technologies.
In our opinion, BorgWarner is well positioned for the trends in the auto sector that will result in revenue growth in excess of the growth in global automobile demand. We estimate 5% average annual revenue growth over our five-year forecast, roughly 2-4 percentage points higher than our expectations for 1%-3% long-term growth in global light vehicle demand.
We expect four-cylinder gasoline engine penetration to accelerate, given more stringent clean air legislation around the world. We also think that an early demise to the diesel engine in passenger vehicle applications is over exaggerated by the market. Turbochargers, one of BorgWarner's products for which it commands an industry leading market share, are a cost-effective way for OEMs to improve engine efficiency, which increases fuel economy and lowers tailpipe emissions.
BorgWarner is also well positioned for growth in hybrids and batter electric vehicles. Through its 2015 acquisition of Remy, the company possesses electric motor technology. Integrating electric motors with other BorgWarner technologies enables the company to capitalize on the increasing penetration of hybrids and battery electrics. Regardless of the powertrain automakers chose, we think BorgWarner revenue growth potential remains unchanged.
BorgWarner's drivetrain business includes wet dual-clutch and torque transfer technologies. Dual-clutch transmissions, which contain eight or more gears compared with older technology automatic transmissions equipped with four gears, can generate 5%-15% in fuel savings. Torque transfer devices enable all-wheel drive and four-wheel drive for globally popular sport utility and cross-over vehicles.”
Disclosure: No position at the time of writing.
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