BorgWarner Inc. (BWAFree report) announced the sale of its thermostat business to Arlington Industries Group Ltd. for around 24 million euros. The agreement includes two production centers located in Piracicaba, Brazil, and Oberboihingen, Germany. Subject to customary closing conditions, the transaction is expected to close in the first quarter of 2019.

BorgWarner has added to its portfolio the exhaust gas recirculation valve and thermostat activities, via the acquisition of Gustav Wahler GmbH & Co. KG in 2014. The evolution of market demand over time. Years has resulted in different product developments in the thermostat unit. However, this unit's offerings make it a non-essential activity for BorgWarner, which focuses on vehicle propulsion systems. According to some sources, the diversity of product offerings has pushed BorgWarner to sell his business. Last year, the company is expected to generate a turnover of about 110 million euros. In addition, first-quarter unit sales will result in a loss of approximately $ 20 to $ 30 million for BorgWarner.

The divestiture of the thermostat business will help BorgWarner to separate from a non-core business and focus on the development of technically improved propulsion systems in light of changing market demand.

BorgWarner Inc. Awards and Consensus

The company has strong cash flow from new contracts won worldwide. In addition to generating positive cash flow, he also believes that winning business is a key prospect for long-term growth. In addition, the company has set a target of generating $ 1 billion in free cash flow by 2023, thanks to the new contracts won, along with the launch of new products. For 2018, it expects free cash flow of between $ 550 and $ 575 million, despite strong pressures on working capital and tax payments.

In the third quarter of 2018, the company's revenues increased 2.6% to $ 2.5 billion, driven by remarkable growth in North America and single-digit growth in China. In addition, its commercial and all-terrain vehicle products posted a positive revenue trend in Europe, offset by sales of light-duty vehicles. BorgWarner posted a profit of $ 1 per share in the third quarter of 2018, surpassing the Zacks consensus estimate of 99 cents.

Nevertheless, market volatility and uncertain sectoral volumes are of concern to the company in the fourth quarter of 2018. In fact, this has forced BorgWarner to reiterate its 2018 organic growth forecast. For 2018, it expects net sales of $ 10.49 to $ 10.58 billion, which implies organic growth of 4.5 to 5.5% and earnings per share of $ 4.35 to $ 4.40. .

Price performance

Over the last three months, BorgWarner shares have lost 16.3% over industryDecrease of 21.2%.

Zacks Rank & Key Picks

BorgWarner is currently ranked 3 by Zacks (pending). Bridgestone Corporation (BRDCYFree report), CarGurus, Inc. (CARGFree report) and Daimler AG (DDAIFFree report), each wearing a Zacks Rank # 2 (Buy). You can see Here you will find the complete list of Zacks shares # 1 of current rank (strong buy).

Bridgestone has an expected long-term growth rate of 4.7%. The company's share price has risen by 3.8% over the past three months.

CarGurus has a projected long-term growth rate of 5%. The company's shares gained 9.4% over the past year.

Daimler has an expected long-term growth rate of 2.7%. In the last month, the company's shares gained 3.1%.

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