BorgWarner raises 2026 profit forecast on buybacks, lower tax rate

BorgWarner Inc. (BWA) said on Oct. 29 that third-quarter 2026 adjusted earnings per diluted share were $1.39, up from $1.24 a year earlier and above the $1.26 consensus estimate compiled by Finnhub. The company also raised its full-year adjusted earnings guidance.

Net sales were $3.49 billion, below the $3.55 billion consensus estimate, and down about 2.9% from a year earlier. The company said the decline was driven by lower market production volumes and lower Battery Energy Systems segment sales.

Here's how the company did:

• Adjusted EPS: $1.39 vs. $1.24 a year earlier, against $1.26 expected, according to Finnhub
• Revenue: $3,487 million vs. $3,591 million a year earlier, against $3.55 billion expected, according to Finnhub
• GAAP EPS: $1.08 per diluted share vs. 73 cents a year earlier
• GAAP operating income: $302 million vs. $248 million a year earlier

Organic net sales decreased 3.1% from the third quarter of 2025. Adjusted operating margin was 10.9%, an increase of 20 basis points from a year earlier.

The company repurchased about $175 million of its shares and paid a $35 million cash dividend in the quarter. It also reduced its gross debt by $864 million through a debt tender and make-whole redemption.

2026 guidance

The company raised its 2026 adjusted EPS guidance to $5.20 to $5.35 per share, from the previous $5.05 to $5.30 range. It attributed the increase to expected impacts of its share repurchases and a decline in its full-year effective tax rate.

GAAP EPS guidance is $4.65 to $4.84 per diluted share. Net sales guidance was narrowed to $14.0 billion to $14.2 billion, from $14.0 billion to $14.3 billion, due to lower industry production expectations at the high end of the previous range.

The company expects its weighted light vehicle market to be down 2% to down 1% in 2026. It also expects a $10 million to $15 million industrial R&D investment. Operating cash flow is expected at $1,600 million to $1,700 million and free cash flow at $900 million to $1,100 million, consistent with its previous guidance.

Segment results

Turbos & Thermal Technologies sales were $1,372 million, down from $1,437 million. Drivetrain & Morse Systems sales were $1,346 million, down from $1,452 million. PowerDrive Systems sales rose to $705 million from $582 million, while Battery Energy Systems sales fell to $78 million from $132 million.

The company said it secured nine new business awards. They include an engine control module award with a global OEM for a new internal combustion engine pickup truck platform, with production expected to begin in 2029. Another is a first aluminum-wire eMotor program award with a Chinese OEM for hybrid vehicles, with production expected to begin in 2026.

Costs and cash

Restructuring expense was $50 million in the quarter, up from $23 million a year earlier. Non-comparable items totaled $79 million in pretax expenses, which the company excluded from its adjusted operating income of $381 million.

Net cash provided by operating activities was $320 million in the quarter, and free cash flow was $195 million. For the first nine months, free cash flow was $700 million.

According to its SEC filings, net income swung from a loss of $262.0 million in the fourth quarter of 2025 to a profit of $242.0 million in the first quarter of 2026.