BWA Tops Q2 Earnings Estimates on Cost Control, Boosts Buyback

Gross profit rose to $721 million from $640 million in the year-ago quarter. Gross margin improved to 19.8% from 17.6%, reflecting lower cost of sales and disciplined operating execution. Adjusted operating income increased to $413 million from $373 million.

BWA currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BorgWarner's Segmental Performance

Turbos & Thermal Technologies sales declined 2.6% year over year to $1.44 billion amid lower industry production. Organic sales fell 4.3%. Segment adjusted operating income slipped to $225 million from $227 million.

Drivetrain & Morse Systems revenues increased 1.8% to $1.5 billion, aided by strong North American transfer-case volumes. Adjusted operating income rose to $277 million from $260 million, supported by higher sales and operating execution.

PowerDrive Systems sales grew 14.5% to $665 million, including organic growth of 11.7%. Its adjusted operating loss narrowed to $29 million from $33 million, driven by higher sales.

Battery Energy Systems revenues plunged 37.1% to $100 million due to weaker European demand and the absence of North American incentives. However, the segment’s adjusted operating loss narrowed to $2 million from $12 million, helped by restructuring actions and savings from the charging-business exit.

BWA Builds Its New Business Pipeline

BorgWarner announced seven awards spanning combustion, hybrid and electric-vehicle technologies. These included an eTurbo program for a European automaker, a torque-on-demand transfer case for a Chinese SUV and two variable cam timing programs.

The company also secured an integrated drive module award using its next-generation three-in-one system. Two high-volume inverter program extensions cover plug-in hybrid and 800-volt battery-electric applications. Production for the announced programs is scheduled to begin between late 2026 and 2029.

BorgWarner Advances Industrial Products

The company noted progress in data-center and industrial applications. Testing of its turbine generator achieved California Air Resources Board-level emissions standards, while component certification work is expected to begin in September.

BorgWarner continues to target a 2027 launch and had previously outlined roughly $300 million of turbine-generator revenues for that year. Customer interest includes multiple hyperscalers, and management expects to decide during the second half of 2026 whether additional capacity is needed.

BorgWarner is also developing energy-storage systems, microgrid inverters and power-conversion products. Four customers have received inverter samples, and the company is expanding its portfolio from 400 volts to 1,500 volts. It plans to invest an additional $10-$15 million in industrial research and development during the second half.

BWA Raises Its 2026 Earnings View

BWA raised its full-year adjusted earnings guidance to $5.05-$5.30 per share from $5-$5.20. The company maintained its sales outlook of $14-$14.3 billion and adjusted operating margin forecast of 10.7%-10.9%. Organic revenues are expected to decline 1.5%-3.5%, including an anticipated $250 million reduction in Battery Energy Systems sales.

BorgWarner's Cash Flow Supports Buybacks

Second-quarter operating cash flow totaled $586 million, while free cash flow was $492 million. For 2026, the company continues to expect operating cash flow of $1.6-$1.7 billion and free cash flow of $900 million-$1.1 billion.

BorgWarner returned about $134 million to shareholders during the quarter through repurchases and dividends. Its board increased the share repurchase authorization by $1 billion, bringing total available authorization to approximately $1.35 billion through 2029. Cash and equivalents were $2.45 billion as of June 30, 2026.

Key Releases From the Auto Space

General Motors GM reported second-quarter 2026 adjusted earnings of $3.57 per share, up 41.3% year over year. The figure beat the Zacks Consensus Estimate of $3.13 by 14.06%. Revenues increased 1.9% to $48.03 billion and surpassed the consensus estimate of $46.56 billion by 3.15%. General Motors raised its full-year adjusted EBIT guidance to $14-$16 billion from $13.5-$15.5 billion. Adjusted earnings are now projected at $12-$14 per share, up from the prior range of $11.50-$13.50.

Tesla, Inc. TSLA reported second-quarter 2026 adjusted earnings of 33 cents per share, which declined 17.5% year over year. The figure missed the Zacks Consensus Estimate of 50 cents by 34%. Revenues advanced 25.5% to $28.24 billion and surpassed the consensus estimate of $25.81 billion by 9.41%. Tesla expects 2026 capital expenditures to exceed $25 billion and rise further over the next two to three years. 

Ford F reported second-quarter 2026 adjusted earnings of 42 cents per share, beating the Zacks Consensus Estimate of 33 cents by 27.27%. Earnings rose 13.5% from 37 cents a year ago. Automotive revenues of $44.89 billion fell 4.4% year over year and missed the consensus mark of $45.72 billion by 1.81%. Ford’s consolidated second-quarter revenues came in at $48.3 billion, down 3.7% year over year. The company raised its full-year adjusted EBIT outlook to $10-$11 billion from $8.5-$10.5 billion. 

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