BorgWarner (BWA) J.P. Morgan Automotive Conference summary

Strategic priorities and internal transformation

• Focus shifted to engaging all business units for growth, not just eProducts, resulting in around 60 awards over 18 months.

• Emphasis on growing earnings power and maintaining disciplined, balanced capital allocation to reward shareholders.

• Structural cost controls and business restructuring have driven sustainable margin expansion.

• Capital allocation decisions are guided by a 15% ROIC target, with strong liquidity supporting future investments.

• M&A criteria now require industrial logic, EPS accretion, and fair pricing, with a broader aperture beyond automotive.

Financial performance and guidance

• Quarterly revenue was $3.6 billion, flat year-over-year, but margins expanded by 100 basis points to 11.3%.

• Earnings per share grew 17% year-over-year, aided by operating income and share repurchases.

• Free cash flow reached about $500 million, with all KPIs showing strong performance.

• Second-half revenue expected to decline by $200 million due to FX headwinds, battery business decline, and lower industry production.

• Margin profile remains stable, with increased R&D spend in the second half reflecting customer-driven innovation.

Growth drivers and product innovation

• Growth is driven by a diverse array of products, regions, and customer groups, not reliant on a single segment.

• Turbine generator system expected to contribute $300 million in revenue in 2027, with launch and certification as key near-term priorities.

• The shift from backup to primary power markets for the turbine generator signals strong product durability and customer demand.

• Inverter and battery energy storage solutions are being developed for industrial and data center markets, leveraging automotive expertise in high-voltage systems.

• Both BESS and inverters are targeted to be production-ready by 2027, with initial focus on North America.