Goldman Sachs lifts BorgWarner stock rating to Buy, target to $34

On Thursday, Goldman Sachs upgraded BorgWarner (NYSE:BWA) shares, raising its rating from Neutral to Buy and increasing the price target to $34 from $31. The decision comes as the firm recognizes BorgWarner's position in the market, considering several key factors that could contribute to its performance. According to InvestingPro data, the company appears undervalued compared to its Fair Value, with strong financial health metrics and a solid track record of maintaining dividend payments for 13 consecutive years.

Goldman Sachs acknowledged BorgWarner's lower-than-average dependence on U.S. imports as a percentage of its EBIT, which could be advantageous amid concerns over potential retaliatory tariffs. However, the firm also noted that risks remain for BorgWarner and other tier 1 suppliers, although these are somewhat offset by the company's strategy of producing in the same region where its products are sold.

Another point in BorgWarner's favor is its significant sales exposure to the Chinese market, which accounts for approximately 20% of its total revenue. A large portion of these sales is tied to domestic OEMs in China, which are experiencing faster growth, particularly in the area of eProducts.

Goldman Sachs also highlighted the enduring potential for BorgWarner's hybrid and internal combustion engine (ICE) products. While acknowledging that the automotive industry is increasingly shifting towards electric vehicles (EVs), the analyst pointed out that BorgWarner is well-positioned with its diversified product offerings for all powertrain types. Additionally, the company is seen to have an attractive opportunity to increase its content per vehicle, especially with EVs.

The upgrade by Goldman Sachs suggests a positive outlook for BorgWarner, as it appears well-positioned to navigate the challenges and opportunities in the evolving automotive industry. With the raised price target and upgraded rating, the company's stock could attract increased interest from investors.

In other recent news, BorgWarner reported fourth-quarter earnings that exceeded analyst expectations, with an adjusted earnings per share (EPS) of $1.01, surpassing the consensus estimate of $0.96. However, the company's revenue saw a slight decline of 2% to $3.44 billion, which missed the consensus by $30 million. Looking ahead to 2025, BorgWarner's earnings per share guidance ranges between $4.05 and $4.40, which is below the analyst estimate of $4.23. The company also projects revenue between $13.4 billion and $14 billion, falling short of the consensus of $14.12 billion.

CFRA analyst Garrett Nelson lowered the 12-month price target for BorgWarner to $32 from $35 while maintaining a Hold rating. Nelson expressed concerns about the company's earnings growth due to a slowdown in electric vehicle demand and the potential elimination of the federal electric vehicle tax credit. Despite these challenges, BorgWarner achieved an adjusted operating margin of 10.2% in the fourth quarter and anticipates maintaining strong margins and cash flow in 2025. The company also secured new business awards, including Variable Cam Timing systems for a major East Asian OEM and turbocharger program extensions with a North American OEM, which are expected to contribute to its long-term growth.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.