Borg Warner Downgraded at the Top (BWA)

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BorgWarner Inc. (NYSE: BWA) is being downgraded at the top of its range. At $79.41, it has a 52-week range of $54.59 to $79.90.  Today’s downgrade comes from Gabelli & Co. to HOLD from a prior BUY rating.  This is a valuation call and it is one which is frankly hard to argue against because it has already gone so well.

The firm noted, “While we hold BWA management in high regard and expect the company to continue to outperform global auto industry growth over the next several years, margin of safety for investors has narrowed, as shares have appreciated nearly 25% already this year.”

Further noted:

  • “it once again exhibited strong earnings, with 4Q adjusted EPS of $1.19 in line with our expectations. We’ve increased our FY12 EPS estimate to $5.70, from $5.40, to reflect higher drivetrain segment margins.”
  • “At roughly $80, BWA shares trade at less than a 15% discount to our FY13 PMV estimate of $93 (based on 7.5x 2013 EBITDA). At current prices, we are willing to wait for a more attractive re-entry point.”