BorgWarner Raises EPS Forecast to $5.20 After Adjusted Earnings Grow 12.1%
Key Facts
BorgWarner raised its 2026 adjusted earnings-per-share forecast to a range of $5.20–$5.35 after reporting adjusted diluted earnings of $1.39 per share in the third quarter, up 12.1% from the same period last year. The company reported the results on October 29 and scheduled a call to discuss them that day between 9:30 and 10:30 a.m. Eastern time, according to its investor relations calendar. Adjusted earnings improved as sales declined: the company reported $3.487 billion, down 2.9% year over year. Earnings under U.S. generally accepted accounting principles were $1.08 per diluted share. The results put earnings growth against revenue contraction, as the company raised its earnings-per-share forecast and lowered the upper end of its annual sales outlook.
Third-quarter organic sales were 3.1% below their level a year earlier, highlighting weakness in underlying activity alongside the decline in reported sales. The company attributed the decrease mainly to lower market production volumes and lower sales in its battery energy storage systems segment. In its statement, it said the decline was "primarily driven by lower market production volumes and lower battery energy storage systems segment sales." Meanwhile, adjusted operating margin was 10.9%, up 20 basis points year over year. The divergence between sales and margin indicates that the margin improvement did not prevent revenue from contracting this quarter, while the company identified weaker production and battery sales among the factors weighing on results.
Third-quarter indicators differed from the prior quarter in the same year: in the second quarter of 2026, reported sales rose 0.3% year over year, while organic sales fell 1.2%, and adjusted operating margin reached 11.3% after rising 100 basis points. In the third quarter, reported sales fell 2.9% and organic sales fell 3.1%, while adjusted margin reached 10.9%, with a smaller year-over-year increase of 20 basis points. A year earlier, organic sales had risen 2.1% in the third quarter of 2025, when adjusted operating margin was 10.7%, up 60 basis points from the third quarter of 2024. This sequence shows organic sales growth in the comparison period giving way to contraction in the current quarter, while adjusted margin remained above its level a year earlier.
The company raised its annual adjusted earnings-per-share range to $5.20–$5.35 from $5.05–$5.30, attributing the increase to the impact of share repurchases and a lower expected annual tax rate. At the same time, it narrowed its 2026 net sales forecast to $14.0–$14.2 billion. The company expects operating cash flow of between $1.6 and $1.7 billion, and free cash flow of between $900 million and $1.1 billion during the year. It also expects an annual decline of about $250 million in battery energy storage systems segment sales, representing a 1.7% headwind to organic sales growth in 2026. The higher earnings forecast therefore came alongside a narrower annual sales range and expectations of continued pressure from the battery segment.
Cash flow from operating activities was $320 million in the third quarter, while free cash flow reached $195 million. BorgWarner repurchased about $175 million of shares and paid $35 million in cash dividends during the quarter. The company reduced total debt by $864 million through a debt tender offer and an early redemption with a make-whole payment. These moves came in a quarter when the company combined declining sales with higher adjusted earnings per share and generated positive cash flow. The share repurchase authorization was increased by $1 billion in August to a total of about $1.35 billion, with the company intending to continue repurchases through 2029.
BorgWarner announced 9 new business awards across its portfolio on October 29. The awards include an engine control unit program for a truck engine, with production expected to begin in 2029, and three electric motor programs expected to begin production between 2027 and 2028. These programs form part of the company's backdrop for its future business mix, alongside its forecast for lower battery energy storage systems segment sales in 2026. In the near term, the company listed investor conferences on November 12, 17 and 18, followed by December 2, 3 and 8, 2026. BorgWarner shares closed at $55.93 in the October 28 session, the day before the results announcement.