Analysts Just Published A Bright New Outlook For BorgWarner Inc.'s (NYSE:BWA)
BorgWarner Inc. (NYSE:BWA) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.
After the upgrade, the six analysts covering BorgWarner are now predicting revenues of US$9.5b in 2020. If met, this would reflect a solid 8.5% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to plummet 22% to US$1.69 in the same period. Before this latest update, the analysts had been forecasting revenues of US$8.4b and earnings per share (EPS) of US$1.50 in 2020. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
View our latest analysis for BorgWarner
It will come as no surprise to learn that the analysts have increased their price target for BorgWarner 9.1% to US$50.75 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on BorgWarner, with the most bullish analyst valuing it at US$64.00 and the most bearish at US$43.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that BorgWarner's rate of growth is expected to accelerate meaningfully, with the forecast 8.5% revenue growth noticeably faster than its historical growth of 4.7% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 12% next year. It seems obvious that, while the future growth outlook is brighter than the recent past, BorgWarner is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, BorgWarner could be worth investigating further.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on BorgWarner that suggests the company could be somewhat undervalued. You can learn more about our valuation methodology on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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