• Revenue: Approximately $14 billion in sales for 2024, relatively flat versus 2023.
• Adjusted Operating Margin: Above 10%, exceeding the high end of guidance.
• Adjusted Earnings Per Share (EPS): Grew by 15% year-over-year.
• Free Cash Flow: $729 million, up 29% year-over-year, exceeding full-year guidance.
• Fourth Quarter Sales: Just over $3.4 billion, down approximately 2% versus prior year.
• Fourth Quarter Adjusted Operating Margin: 10.2%.
• Fourth Quarter Free Cash Flow: $539 million.
• Goodwill and Fixed Asset Impairment Charges: $646 million recorded in the fourth quarter.
• 2025 Sales Guidance: Projected in the range of $13.4 billion to $14 billion.
• 2025 Adjusted Operating Margin Guidance: Expected to be in the range of 10.0% to 10.2%.
• 2025 Adjusted EPS Guidance: Expected in the range of $4.05 to $4.40 per diluted share.
• 2025 Free Cash Flow Guidance: Expected in the range of $650 million to $750 million.

• Warning! GuruFocus has detected 5 Warning Signs with BWA.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BorgWarner Inc (NYSE:BWA) delivered approximately $14 billion in sales for 2024, demonstrating resilience in challenging market conditions.
• The company achieved a strong adjusted operating margin above 10%, exceeding the high end of their guidance.
• BorgWarner Inc (NYSE:BWA) secured multiple new product awards for both foundational and eProducts, supporting long-term profitable growth.
• Free cash flow increased by 29% year-over-year to $729 million, surpassing full-year guidance.
• The company is well-positioned to continue generating strong free cash flow in 2025 while investing in long-term growth.

Negative Points

• Global industry production was down approximately 3% for the full year, impacting overall sales growth.
• The company recorded a $646 million goodwill and fixed asset impairment charge due to delayed BEV adoption in Western markets.
• Sales in the fourth quarter were down approximately 2% year-over-year, with challenges in China due to lower volumes on an existing EV program.
• BorgWarner Inc (NYSE:BWA) anticipates another year of declining industry volumes in 2025, with potential headwinds from global tariffs.
• The company expects a sales headwind from weaker foreign currencies amounting to $410 million in 2025.

Q & A Highlights

Q: How does BorgWarner's portfolio handle short-term shifts in powertrain programs, such as cancellations or delays? A: Joseph Fadool, Vice President, President and General Manager of BorgWarner Emissions, Thermal and Turbo Systems, explained that while there have been some delays or cancellations in EV programs, there is an increase in RFQs for foundational products. This results in higher volumes of existing products or program extensions, positioning BorgWarner well to adapt to these shifts and be ready for future EV launches.

Q: What is BorgWarner's exposure to domestic versus international players in China, and how might this shift in 2025? A: Joseph Fadool noted that China accounts for about 20% of BorgWarner's global sales, with 75% of those sales coming from Chinese OEMs. This positions BorgWarner strongly as these OEMs grow domestically and expand their exports. Additionally, 90% of the business with these domestic players is on New Energy Vehicles (NEVs).

Q: How is BorgWarner's eProducts segment expected to perform, particularly in light of regulatory changes in Europe and the US? A: Craig Aaron, Chief Financial Officer, stated that while the eProducts business is growing year-over-year, it has softened slightly due to the battery business. The revenue decline is attributed to lower sale pricing, although the business remains robust and ahead of initial expectations despite market challenges.

Q: What is the outlook for BorgWarner's foundational product awards, and how might this impact future growth? A: Craig Aaron highlighted that BorgWarner has secured numerous foundational product awards, indicating strong portfolio strength. These awards often result in program extensions or new bids, supporting the company's goal to outgrow the market across its entire portfolio.

Q: How does BorgWarner plan to manage potential tariff impacts on products manufactured in Mexico and imported to the US? A: Craig Aaron explained that BorgWarner generally produces in the same regions as its customers. In 2024, about $875 million worth of materials and value were imported to the US, with half originating from Mexico. BorgWarner plans to share any tariff impacts with customers and suppliers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.