BorgWarner Raises 2026 EPS Guidance as Q3 Margin Expands

BorgWarner (NYSE: BWA) increased its full-year 2026 adjusted earnings guidance after third-quarter adjusted earnings per share rose 12%, as cost controls, restructuring savings and share repurchases helped offset lower sales and continued weakness in the battery business.

The automotive supplier now expects adjusted diluted EPS of $5.20 to $5.35 for 2026, compared with its previous range of $5.05 to $5.30. It maintained its adjusted operating margin outlook of 10.7% to 10.9% and free cash flow guidance of $900 million to $1.1 billion.

Third-quarter net sales fell to $3.49 billion from $3.59 billion a year earlier. Organic sales declined about 3.1%, while organic sales excluding the decrease in Battery Energy Systems were down approximately 2%, which BorgWarner said was roughly in line with industry production.

Adjusted operating income was $381 million, compared with $385 million in the prior-year quarter. Adjusted operating margin nevertheless increased to 10.9% from 10.7%, supported by productivity, cost controls and restructuring savings. Adjusted diluted EPS rose to $1.39 from $1.24, primarily due to share repurchases, according to the presentation.

Free cash flow totaled $195 million, down from $266 million a year earlier but still described by the company as strong generation.

Regional and portfolio performance

In North America, BorgWarner outgrew the market, supported by transfer-case volumes. European sales were in line with the market as growth in light-vehicle electrification products was offset by lower battery sales. China performed slightly below the market because of declines in the company’s Foundational products.

BorgWarner reported nine new program awards across its Foundational and eProduct portfolios. These included three turbocharger conquest awards for gasoline platforms in South America and Europe, three HVH motor awards in China for range-extended, battery-electric and hybrid vehicles, and an aluminum-wire eMotor program for hybrid vehicles with a major Chinese automaker.

The company also received a high-voltage inverter award for future battery-electric vehicle programs and an engine control module award for a new internal-combustion-engine pickup truck platform. Production timing for the disclosed programs ranges from 2026 to 2029.

Data center and industrial initiatives

BorgWarner said product readiness and customer engagement were advancing for its data center and industrial markets portfolio. Its turbine generator system is expected to begin production in 2027, with more than $300 million in launch-year sales anticipated. Construction of the manufacturing building has been completed, equipment installation is expected in December and production trials are planned by year-end.

The company is also developing battery energy storage systems for data centers and other industrial settings. Customer validation and UL compliance work are progressing, while discussions continue with multiple customers regarding nickel-manganese-cobalt and lithium-iron-phosphate applications.

For its bidirectional microgrid inverter, BorgWarner has shipped samples to seven customers and expects UL certification in early 2027. The company has also begun quoting an 800-volt power supply unit with its first major customer.

2026 outlook and risks

BorgWarner expects 2026 net sales of approximately $14.2 billion, compared with $14.32 billion in 2025. Its outlook calls for organic sales to decline 4% to 2.5%, versus the prior forecast for a decrease of 3.5% to 1.5%. The company assumes an exchange rate of $1.14 per euro.

Management estimates BorgWarner’s weighted light-vehicle market will contract 2% to 1% in 2026. Its planning assumptions include capital expenditures of $600 million to $700 million and an adjusted tax rate for ongoing operations of about 22.5%.

The outlook remains subject to uncertainty surrounding automotive production, electric-vehicle demand, battery sales, tariffs and global trade policy. BorgWarner also identified supply disruptions, commodity costs, customer concentration, rapidly changing technologies, foreign-exchange movements and geopolitical conflicts among the factors that could cause actual results to differ from its expectations.