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Q1 results beat on profitability: BorgWarner reported about $3.5 billion in first-quarter sales, with adjusted operating margin improving to 10.5% from 10.0% a year earlier. Adjusted EPS rose 12% and free cash flow improved, helped by cost controls and more than $650 million in share repurchases over the last four quarters.
Full-year 2026 guidance was reaffirmed: The company kept its 2026 outlook unchanged, including sales of $14.0 billion to $14.3 billion and adjusted EPS of $5.00 to $5.20. Management said the forecast still reflects battery-business weakness and softer end markets, but sees offsetting support from foreign exchange and cost discipline.
Growth is increasingly tied to new awards and non-auto markets: BorgWarner won 12 new business awards in the quarter across electrification, turbochargers and drivetrain programs, while also pushing deeper into data center and industrial power-generation opportunities. The company expects turbine generators, energy storage systems and grid-tie inverters to reach production readiness in 2027.
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BorgWarner (NYSE:BWA) reported first-quarter sales of about $3.5 billion and said its profitability improved despite lower production volumes and continued weakness in its battery business, as management reaffirmed its full-year 2026 outlook.
President and Chief Executive Officer Joe Fadool said BorgWarner’s organic net sales, excluding the decline in its battery energy systems segment, were down about 3% year over year, in line with the decline in market production. The company posted an adjusted operating margin of 10.5%, up from 10.0% a year earlier.
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“This strong underlying operational performance was once again driven by our focus on cost controls across our business,” Fadool said on the call.
Chief Financial Officer Craig Aaron said adjusted operating income was $372 million, compared with $352 million a year ago. Adjusted earnings per share rose 12% from the prior-year period, helped by higher adjusted operating income and more than $650 million in share repurchases over the past four quarters. Free cash flow was $13 million, improving by $48 million from a year earlier.
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BorgWarner left its full-year guidance unchanged. The company continues to expect 2026 sales of $14.0 billion to $14.3 billion, adjusted operating margin of 10.7% to 10.9%, adjusted earnings of $5.00 to $5.20 per diluted share and free cash flow of $900 million to $1.1 billion.
Aaron said the outlook assumes a $200 million sales benefit from foreign exchange, reflecting a stronger euro and renminbi against the U.S. dollar. BorgWarner expects its weighted end markets to be flat to down 3% for the year. The company also expects a decline in battery business sales tied to the lack of North American incentives and weaker European demand, representing a 150-basis-point headwind to year-over-year sales growth.
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At the midpoint, Aaron said the guidance implies adjusted EPS growth of about 4% versus 2025, despite lower industry production, battery sales declines and potential cost inflation. He said the company believes it can manage inflationary pressures within its expected decremental conversion range through cost controls.
Fadool highlighted 12 new business awards during the quarter, saying they reflect demand for BorgWarner’s propulsion technologies across combustion, hybrid and battery-electric vehicle architectures.
The awards included three electric motor contracts with Asian automakers in South Korea and China. BorgWarner is introducing S-winding and ultra-short hairpin winding technologies for hybrid vehicles in China and secured a stator assembly award for an electric vehicle program in South Korea.
The company also secured a seven-year contract extension with a leading off-highway manufacturer to supply eight families of engine, machine, power module and battery management controllers. Fadool said the extension spans construction vehicles, marine platforms and stationary power systems.
In turbochargers, BorgWarner won three program extensions and one conquest award with a major European automaker for passenger car and van applications, including variable turbine geometry, twin-scroll wastegate and regulated two-stage turbocharging technologies. The company also won conquest business with a major European commercial vehicle OEM to supply a variable turbine geometry turbocharger and exhaust gas recirculation cooler for a Euro 7-compliant heavy-duty diesel engine platform, with production expected to begin at the end of 2028.
In Asia, BorgWarner won new drivetrain and engine timing programs, including a next-generation wet dual clutch for a Chinese OEM’s SUV platform and a Cam Torque Actuated variable cam timing system for a Japanese OEM’s next-generation hybrid engine.
BorgWarner devoted significant discussion to its expansion into data center and industrial markets, particularly power generation, energy storage and power conversion.
Fadool said the company’s turbine generator program remains on track for a 2027 launch. BorgWarner has begun delivering first B-sample turbine generators to its customer, completed supplier nominations for production and started the UL compliance process. He said internal UL compliance requirement evaluation has been completed on B-samples, with final certification expected to take place with C-samples later this year.
The company has installed 2 gigawatts of turbine generator capacity in North Carolina, and Fadool said BorgWarner expects to decide later this year whether to expand beyond that level. He said the company is seeing strong demand for behind-the-meter power generation as utilities face multi-year lead times to provide power for data centers.
During the question-and-answer session, Fadool said BorgWarner’s value proposition in power generation includes faster time to market, a favorable emissions profile and attractive total cost of ownership. He said the turbine generator’s emissions profile meets California Air Resources Board requirements for 2027 and beyond.
BorgWarner is also developing battery energy storage systems for data center, commercial and industrial applications. Fadool said the product is designed to be cell chemistry, form factor and application independent, with potential uses including peak shaving and backup power. The company expects the system to be production ready in 2027 and said customer validation and UL compliance are in process.
The company is also adding bidirectional microgrid, or grid-tie, inverters to its portfolio. BorgWarner expects that product to be production ready in 2027 and said the first B-sample units are being shipped to four customers.
BorgWarner returned about $185 million to shareholders during the quarter through share repurchases and its quarterly dividend. Aaron said the company has deployed more than $800 million to shareholders over the past five quarters, representing about 70% of free cash flow.
Fadool said BorgWarner’s first priority remains investing in organic growth. On mergers and acquisitions, he said the company continues to evaluate targets inside and outside the automotive sector, including opportunities tied to data centers, but will remain disciplined. He said any deal must leverage BorgWarner’s core competencies, be accretive and be priced fairly.
“While the current environment remains challenging and uncertain, I’m confident in our team’s ability to effectively navigate these conditions,” Fadool said.
BorgWarner Inc is a global automotive supplier specializing in propulsion and drivetrain solutions for combustion, hybrid and electric vehicles. The company's product portfolio includes turbochargers, thermal management systems, transmission components, e-Propulsion modules and advanced fuel-efficiency technologies. BorgWarner serves original equipment manufacturers (OEMs) across passenger cars, light trucks and commercial vehicles, supporting both legacy internal-combustion engines and emerging electrification trends.
Founded in 1928 through the merger of several driveline companies, BorgWarner has grown through strategic acquisitions and continuous investment in research and development.
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The article "BorgWarner Q1 Earnings Call Highlights" was originally published by MarketBeat.
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