BorgWarner, Dana Cut Forecasts on Falling European Demand
BorgWarner Inc. (BWA), which makes turbochargers, and Dana Holding Corp. (DAN), a maker of axles for cars, trucks and construction equipment, lowered their forecasts for annual sales and profit because of the economic slowdown in Europe and other markets.
The revised forecasts reflect the financial difficulties their customers having in Europe, headed for its fifth-straight year of declining sales. Automakers, including General Motors Co. (GM) and Ford Motor Co. (F), are struggling to cut losses in the region.
“Our gut instinct is that the auto names overall are unlikely to gain traction until the European overhang eases at least modestly,” Peter Nesvold, an analyst with Jefferies & Co., wrote in a research note today about BorgWarner.
Dana, based in Maumee, Ohio, said profit this year will be $1.94 to $2.01 a share, compared with a forecast of as much as $2.05 that it reaffirmed on April 25. The average estimate of 15 analysts surveyed by Bloomberg was for a profit of $1.89. Dana, in a statement, cited “softening production demand in certain end markets” for its lower forecast.
BorgWarner said profit this year would be $5.05 to $5.25 a share, compared with a January forecast of as much as $5.65, because of “weakening global economic conditions.” The average estimate of 22 analysts surveyed by Bloomberg was for a profit of $5.35. Sales will rise 4 percent to 6 percent, compared with an earlier forecast of as much as 12 percent, according to a statement.
“Our outlook for Europe and for commercial vehicle markets around the world has been negatively impacted by the general slowdown in the global economy,” Tim Manganello, BorgWarner’s chief executive officer, said in the statement.
BorgWarner’s profit in the three months ended June 30 fell 26 percent to $120.6 million, or $1 a share, from $162 million or $1.31 a share. Sales rose 2.1 percent to $1.86 billion, compared with $1.96 billion, the average of 14 analysts’ estimates. Excluding some costs and charges, profit was $1.36 a share. On that basis, 21 analysts in a Bloomberg survey estimated $1.37 a share.
Dana reported a 26 percent increase in profit to $86 million from $68 million, while adjusted earnings per share rose to 56 cents a share from 45 cents. The average of 14 estimates was for a profit of 51 cents. Sales rose less than 0.1 percent to $1.95 billion, compared with $2 billion, the average of 10 estimates.
Dana surged as much as 13 percent, the biggest intraday gain in 11 months. Shares rose 12 percent to $12.70 at 10:14 a.m. in New York. BorgWarner, based in Auburn Hills, Michigan, gained 2 percent to $63.36.
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