BorgWarner Raises 2026 Adjusted Earnings Outlook

The Tip Desk · October 30, 2026 · 4 min read

The auto-parts supplier lifted its 2026 adjusted EPS range to $5.20–$5.35 after third-quarter sales of $3,487 million.

BorgWarner Inc. (BWA) raised its 2026 adjusted earnings-per-share outlook after a third quarter in which U.S. GAAP net sales slipped 2.9% from a year earlier, to $3,487 million, while adjusted net earnings rose to $1.39 a share.

The company said it increased 2026 adjusted EPS guidance because of expected share repurchases and a decline in its full-year effective tax rate. The new range is $5.20 to $5.35 a share, versus the prior $5.05 to $5.30. GAAP earnings are expected at $4.65 to $4.84 a share.

Organic net sales, excluding foreign currency, fell 3.1%, a steeper drop than the 1.2% organic decline in the second quarter. The company said the sales decrease was primarily driven by declining market production volumes and lower Battery Energy Systems sales.

U.S. GAAP operating income was $302 million, or 8.7% of net sales, up 180 basis points from 6.9% a year earlier. Adjusted operating income was $381 million, or 10.9% of net sales, after a 10.7% adjusted margin a year earlier. The company said continued cost controls allowed it to deliver strong performance despite a lower industry production environment.

GAAP net earnings were $221 million, or $1.08 a diluted share, up 47.9% from $0.73 a year earlier. Adjusted net earnings of $1.39 a share were up 12.1% from $1.24. The company said the adjusted increase was primarily due to a lower full-year effective tax rate and a lower share count from 2025 and 2026 repurchases.

PowerDrive Systems was the growth pocket. Segment net sales were $705 million, with organic sales up 19.6%. The segment’s adjusted operating loss narrowed to $5 million from a $35 million loss a year earlier.

Battery Energy Systems net sales fell to $78 million from $132 million, with organic sales down 40.9%. The segment posted a $3 million adjusted operating loss versus a $7 million loss a year earlier.

Turbos & Thermal Technologies net sales declined to $1,372 million, with organic sales down 4.4% and segment adjusted operating income of $201 million versus $219 million. Drivetrain & Morse Systems net sales declined to $1,346 million, with organic sales down 7.4% and segment adjusted operating income of $250 million versus $267 million.

Net cash provided by operating activities was $320 million. Free cash flow was $195 million.

The company executed a debt tender and make-whole redemption that reduced gross debt by $864 million in the third quarter. It repurchased about $175 million of shares and paid a $35 million cash dividend.

Full-year 2026 net sales guidance was narrowed to $14.0 billion to $14.2 billion from $14.0 billion to $14.3 billion, implying organic net sales down 4% to down 2.5%. The company said the narrowing reflected lower industry production expectations at the high end of the prior range. Guidance includes an expected year-over-year sales decline of about $250 million in Battery Energy Systems, a 1.7% headwind to organic net sales growth. Foreign currencies are expected to add about $250 million to sales, primarily from a stronger euro and Chinese renminbi.

At the midpoint of 2026 guidance, the company expects another year of adjusted operating margin expansion and adjusted EPS growth despite an expected weighted light-vehicle market down 2% to down 1% and a $10 million to $15 million industrial research-and-development investment. Adjusted operating margin is expected at 10.7% to 10.9%; GAAP operating margin at 9.3% to 9.6%. Free cash flow guidance remains $900 million to $1.100 billion.

BorgWarner announced nine new business awards across the portfolio, including an engine control module for a pickup-truck platform with production expected in 2029, three conquest turbocharger awards for South America and Europe with production expected in 2027, an aluminum-wire eMotor program with a Chinese OEM with production expected in 2026, three additional eMotor awards with production between 2027 and 2028, and a high-voltage inverter award for next-generation battery-electric programs. The company said it has accelerated quoting activity for industrial solutions.