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BorgWarner Updates 2020 Revenue Outlook, Expects 5 To 7 Percent Organic Growth Over The Next 3 Years

BorgWarner said it expects its net new business backlog to drive a compound annual organic growth rate of 5 to 7 percent from 2017 through 2020, compared to compound annual industry growth of 0 to 1 percent over the same time period.

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BorgWarner said it expects its net new business backlog to drive a compound annual organic growth rate of 5 to 7 percent from 2017 through 2020, compared to compound annual industry growth of 0 to 1 percent over the same time period. BorgWarner notes that the growth rate is impacted by the following:

  • 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 to $11.8 billion
  • Asia, the Americas and Europe are expected to account for approximately 41 percent, 38 percent and 21 percent, respectively, of the total net new business backlog over the three-year period
  • Approximately 30 percent 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 percent, 45 percent and 5 percent, respectively, of the total net new business backlog over the three-year period.

Full Year 2018 Guidance

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The company also provided its initial guidance for full year 2018:

  • Net sales of $10.4 billion to $10.6 billion, implying organic sales growth of 5 to 7 percent 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 percent to 7 percent
  • Operating income as a percentage of net sales of 12.6 percent to 12.7 percent compared to 12.5 percent 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 (6 cents) dilutive to EPS. Excluding this impact, guidance implies a 10 percent to 12.5 percent year-over-year improvement in EPS
  • Effective tax rate of approximately 29 percent, 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 Guidance

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The company also provided guidance for first quarter 2018:

  • Organic net sales growth of 3 to 5.5 percent compared with first quarter 2017 net sales of $2.41 billion
  • Foreign currencies are expected to increase sales by $70 million, or +2.9 percent.
  • The acquisition of Sevcon is expected to increase revenue by $15 million
  • Net earnings of 97 cents to $1.01 per diluted share

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