BorgWarner Inc. (BWA) posted a 13% increase in adjusted earnings to 79 cents per share in the third quarter of 2014 from 70 cents in the prior-year quarter. Also, earnings per share were in line with the Zacks Consensus Estimate.

Including the impact of non-comparable items, BorgWarner recorded earnings of $166.6 million or 73 cents per share in the third quarter of 2014, compared with $166.8 million or 72 cents per share a year ago. The increase in earnings per share is due to decline in shares outstanding.

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Revenues improved 13% year over year to $2.03 billion, missing the Zacks Consensus Estimate of $2.06 billion. The sales improvement was driven by global adoption of the powertrain technology and benefits from the Wahler takeover. Excluding the impact of foreign currencies and the Wahler acquisition, revenues went up 8% year over year.

Operating income increased 5.4% to $237.7 million from $225.6 million in the third quarter of 2013. Adjusted operating income stood at $254 million, or 12.5% of net sales.

Segment Details

Revenues in the Engine segment rose 16.7% year over year to $1.41 billion. Excluding the impact of foreign currencies and synergies from the Wahler acquisition, net sales went up 10% in the segment, driven by higher sales of turbochargers and engine timing devices.

Adjusted earnings before interest, income taxes and non-controlling interest (adjusted EBIT) increased 14% to $223 million in the quarter from $196 million in the third quarter of 2013.

Revenues in the Drivetrain segment rose 3.8% to $627 million. Excluding the impact of foreign currencies, net sales increased 3% year over year on increased global sales of dual clutch transmission modules, partly offset by the slow ramp up of a major program by a North American customer. Adjusted EBIT increased 3% to $68 million from $66 million in the third quarter of 2013.

Financial Position

BorgWarner had $782.8 million in cash as of Sep 30, 2014, compared with $939.5 million as of Dec 31, 2013. Total debt, including notes payable, stood at $1.31 billion as of Sep 30, 2014, compared with $1.22 billion as of Dec 31, 2013.

In the first nine months of 2014, net cash from operating activities increased to $546 million from $515 million in the comparable prior-year period. Capital expenditures, including tooling outlays, went up to $398 million from $298 million in the first nine months of 2013.

Outlook

For 2014, BorgWarner’s organic sales are expected to increase 12%–13%, down from the previous guidance of 13%–15%. Further, the company expects net earnings (excluding non-comparable items) for the year in the band of $3.23–$3.28 per share, down from the previous projection of $3.25–$3.35 a share. Operating margin for 2014 is expected to be up 13%.

BorgWarner currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Toyota Motor Corp. (TM), Tata Motors Ltd. (TTM) and Gentex Corp. (GNTX), all of which sport a Zacks Rank #1 (Strong Buy).

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