BorgWarner Inc. BWA is poised to benefit from EV-focused mergers and acquisitions, frequent business wins and PowerDrive Systems restructuring amid currency fluctuations and a lower market production outlook. 

Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

Frequent Business Wins, Restructuring to Aid BorgWarner

The company's EV-focused mergers and acquisitions are boosting its prospects. The acquisition of the charging business of SSE in China — completed in March 2023 — expanded BorgWarner's footprint beyond Europe and North America. The buyout of Eldor Corporation’s Electric Hybrid System business in December 2023 has further enhanced BorgWarner’s electric product portfolio. BorgWarner’s Charging Forward project to accelerate its electrification strategy bodes well. BorgWarner expects its 2024 eProduct sales to be around $2.4 billion compared with nearly $2 billion in 2023.

Frequent business wins are praiseworthy and are set to drive top-line growth. The most recent contracts include three high-voltage coolant heater business wins in Asia, which are expected to expand its technological reach in the Asian EV markets. BorgWarner has secured an award to supply high-voltage eFan systems for a leading global OEM's series of electric commercial vehicles in North America, marking its largest eFan business win in the region. 

These deals showcase BorgWarner's diverse product portfolio catering to electric and hybrid vehicle segments. Additionally, strategic agreements like the one with FinDreams Battery for LFP battery packs reinforce BorgWarner's position as a key player in electrification, promising significant revenue streams across regions and vehicle types. BWA has also fortified its commercial vehicle product line with a JV with Shaanxi Fast Auto Drive to develop a high-voltage inverter for the Chinese electric commercial vehicle market.

The company faces short-term sales challenges in its ePropulsion business due to platform shortfalls and regional market dynamics. To address this, it began restructuring in June to align costs with current sales levels. The company expects cost savings of $20-$30 million in 2024. By next year, these savings could double to $40 million to $60 million. The ultimate goal of the company is to save $100 million each year by 2026. This restructuring aims to accelerate near-term sales and turn that growth into income in the mid-teens. Based on the continued benefits of PowerDrive Systems restructuring, the company has raised its full-year margin outlook to 9.8-10% from the prior guidance of 9.6-9.8% 

BWA's investor-friendly moves also spark optimism. In the third quarter, the company registered a strong free cash flow of $201 million, which allowed it to accelerate its second-half $300 million share repurchase plan. The company has achieved its target of 2024 repurchase of $400 million. As of Sept. 30, 2024, the Company had $363 million under its current repurchase authorization.