BorgWarner (BWA) Guides FY18 Revenue Above Views, Offers 2020 Outlook

BorgWarner Inc. (NYSE: BWA), a global leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles, today announced its three-year net new business backlog, its guidance for full year 2018 and its guidance for first quarter 2018.

Three-Year Net New Business BacklogThe company expects its net new business backlog to drive a compound annual organic growth rate of 5.0% - 7.0% from 2017 through 2020, compared to compound annual industry growth of 0% - 1.0% over the same time period:

• Net new business within a range of $650 million to $730 million in 2018, $675 million to $800 million in 2019 and $700 million to $825 million in 2020.
• Based on these assumptions, the company's 2020 revenue outlook is $11.5 billion - $11.8 billion.
• Asia, the Americas and Europe are expected to account for approximately 41%, 38% and 21%, respectively, of the total net new business backlog over the three-year period.
  • Approximately 30% is expected in China.
• The net new business backlog represents growth across all propulsion architectures with combustion, hybrid and electric vehicles expected to account for approximately 50%, 45% and 5%, respectively, of the total net new business backlog over the three-year period.

Full Year 2018 GuidanceThe company also provided its initial guidance for full year 2018:

• Net sales of $10.4 billion - $10.6 billion, implying organic sales growth of 5.0% to 7.0% compared with expected 2017 net sales of $9.79 billion.
  • Foreign currencies are expected to increase sales by $75 million, primarily due to the appreciation of the Euro.
  • The purchase of Sevcon is expected to increase sales by $45 million.
  • Excluding the impact of stronger foreign currencies and the acquisition of Sevcon, net sales growth is expected to be 5.0% to 7.0%.
• Operating income as a percentage of net sales of 12.6% - 12.7% compared to 12.5% in 2017.
  • The acquisition of Sevcon is expected to decrease margins by approximately 10 basis points.
• Net earnings of $4.15 to $4.25 per diluted share.
  • The acquisition of Sevcon is expected to be ($0.06) dilutive to EPS. Excluding this impact, guidance implies a 10% to 12.5% year-over-year improvement in EPS.
• Effective tax rate of approximately 29%, exclusive of any impact of the new U.S. tax act.
• Free cash flow within a range of $500 million to $550 million.
• Share repurchases of approximately $100 million.

First Quarter 2018 GuidanceThe company also provided guidance for first quarter 2018:

• Organic net sales growth of 3.0% to 5.5% compared with first quarter 2017 net sales of $2.41 billion.
  • Foreign currencies are expected to increase sales by $70 million, or +2.9%.
  • The acquisition of Sevcon is expected to increase revenue by $15 million.
• Net earnings of $0.97 to $1.01 per diluted share.

(Street sees Q1 EPS of $1.05 on revenue of $2.65 billion and FY18 EPS of $4.19 on revenue of $10.34 billion)

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