Last Update 20 Nov 25

BWA: Margin Execution And New Automotive Wins Will Drive Upward Momentum

BorgWarner's analyst price targets have recently increased. The consensus has moved higher by up to $10, as analysts cite strong margin execution, new business wins, and stabilizing automotive demand as key factors supporting the upward revisions.

Analyst Commentary

Recent Street research reveals shifting perspectives within the analyst community as BorgWarner’s financials and industry fundamentals evolve. The latest updates highlight both confidence and caution regarding the company’s outlook and valuation.

Bullish Takeaways

Several bullish analysts have increased price targets for BorgWarner, citing strong margin execution and successful new business awards as indicators of a well-executed strategy.
Improved free cash flow and a favorable updated 2025 EBIT guide, especially compared to peers, have reinforced positive sentiment around the company's operational performance.
Some analysts anticipate BorgWarner could attain the upper end of its guidance range, reflecting confidence in underlying trends and the company’s potential for further growth.
Outlook for the broader automotive sector has stabilized, with ongoing vehicle demand and limited disruption from tariffs. These factors are seen as supportive for BorgWarner’s continued progress.

Bearish Takeaways

Bearish analysts caution that BorgWarner’s current valuation is approaching its historical median. This could make further multiple expansion more difficult unless topline growth accelerates.
Although recent contract awards support future growth, some are not expected to contribute meaningfully to results until 2027 or later. This could potentially delay near-term upside for investors.
Expectations for the sector overall are for only modest upward guidance revisions. Management teams are aiming to temper expectations rather than signal sharp accelerations in performance.
There is wariness that investors may be looking for a clear inflection in operating results before granting further stock momentum, particularly given the cautious outlook on industry growth rates.

What's in the News

BorgWarner secured multiple contracts with Chery to supply advanced all-wheel drive (AWD) technologies for pickup trucks and SUVs. Mass production is slated for 2027. (Key Developments)
The company issued updated 2025 guidance, projecting earnings per diluted share of $3.52 to $3.63 and net sales of $14.1 to $14.3 billion, along with an increase in full-year margin, EPS, and free cash flow outlook. (Key Developments)
BorgWarner completed a share repurchase, buying 2.3 million shares in the latest tranche and totaling 6.61% of shares repurchased under its 2024 program. (Key Developments)
New supply agreements involve BorgWarner providing battery systems for the fully electric, autonomous HOLON Urban shuttle. Manufacturing will begin in 2027 in South Carolina. (Key Developments)
The company landed projects with Great Wall Motor for electrified propulsion and with a leading Chinese OEM for its 7-in-1 Integrated Drive Module for hybrid SUVs. This will support mass production from 2026. (Key Developments)

Valuation Changes

Fair Value: Remained unchanged at $49.21 per share, indicating no revision from prior estimates.
Discount Rate: Increased slightly from 8.88% to 9.35%. This suggests a minor adjustment in the company's perceived investment risk profile.
Revenue Growth: Remained stable at 3.87%, showing no change in expected growth rates.
Net Profit Margin: Remained nearly unchanged at 6.00%, reflecting a consistent outlook for profitability.
Future P/E: Rose slightly from 13.33x to 13.50x, indicating a modest increase in expected valuation multiples.

Robust EV and hybrid demand, platform wins with major OEMs, and strategic capital allocation strengthen long-term growth and earnings stability.
Operational restructuring and battery business consolidation support higher profitability, while increased investment in sustainable mobility enhances competitive positioning.
Persistent dependence on combustion products and inorganic growth, coupled with electrification uncertainty and supply volatility, poses long-term risks to revenue visibility and margin stability.

Catalysts

About BorgWarner

Provides solutions for combustion, hybrid, and electric vehicles worldwide.What are the underlying business or industry changes driving this perspective?

Strong new business awards and accelerating RFQ (request for quotation) activity in both hybrid and electric vehicle (EV) product lines demonstrate robust demand for BorgWarner's electrified propulsion systems, positioning the company to capitalize on the industry-wide transition to hybrid and electric vehicles, and supporting sustained top-line revenue growth as electrification continues to outpace ICE declines.
Expanding platform wins, particularly with major Chinese OEMs for inverters, electric motors, and differential technologies, reflect deeper integration into next-generation EV architectures and can drive higher content per vehicle, strengthening long-term earnings visibility through recurring, higher-margin supply contracts.
Ongoing operational restructuring and cost controls, alongside battery business consolidation measures, are yielding improvements in adjusted operating margins and free cash flow, indicating enhanced profitability and the potential for structurally higher net margins as the company pivots to electrified products.
Balanced capital allocation-with a disciplined approach to accretive M&A and substantial increases in both dividends and share repurchase authorizations-demonstrates management's confidence in long-term cash generation and earnings, while also providing downside protection and potential EPS accretion through buybacks.
Heightened investments in sustainable mobility and smart transportation (exemplified by increased R&D focus, rapid-cycle product launches, and scalable technology in growth markets like China) point to improved long-term industry stability for advanced component suppliers like BorgWarner, bolstering the outlook for sustained revenue and margin expansion.

BorgWarner Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming BorgWarner's revenue will grow by 4.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 1.6% today to 6.4% in 3 years time.
Analysts expect earnings to reach $1.0 billion (and earnings per share of $5.03) by about September 2028, up from $220.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.4x on those 2028 earnings, down from 43.0x today. This future PE is lower than the current PE for the US Auto Components industry at 17.7x.
Analysts expect the number of shares outstanding to decline by 1.05% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.79%, as per the Simply Wall St company report.

BorgWarner Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Continued dependence on foundational/combustion product lines, especially turbochargers, increases risk that long-term shifts away from internal combustion engines and possible regulatory bans or phasedowns on ICE will suppress future revenue and limit organic growth, even as the company attempts to outgrow a structurally declining market.
Multiple references to headwinds in the Battery and Charging Systems (BCS) segment-including ongoing near-term and potentially prolonged declines, volatility in customer demand, and lack of clear signs of imminent stabilization-raise concerns that BorgWarner may experience sustained pressure on both revenue growth and segment margin improvement if electrification trends falter or delays persist.
Winning significant new business in hybrid and combustion platforms could expose BorgWarner to the risk of OEMs shifting future capex and sourcing preferences toward pure battery electric vehicle (BEV) solutions or vertically integrating components, thereby undermining the longevity and profitability of these multi-year contracts and threatening long-term revenue visibility.
Heavy reliance on inorganic growth through M&A for portfolio transformation and scale expansion brings risk of overpaying for assets, integration challenges, or inadequate near-term earnings accretion, potentially leading to dilution, reduced net margins, and long-term pressure on return on invested capital.
Tariff-related cost volatility and global supply chain challenges-evident in both current headwinds and guidance-highlight exposure to international trade tensions, protectionist policies, and cost/supply instability of critical EV materials, all of which could unpredictably impact input costs, compress margins, and diminish earnings stability over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $43.467 for BorgWarner based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $52.0, and the most bearish reporting a price target of just $37.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $16.0 billion, earnings will come to $1.0 billion, and it would be trading on a PE ratio of 11.4x, assuming you use a discount rate of 8.8%.
Given the current share price of $43.69, the analyst price target of $43.47 is 0.5% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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