BorgWarner’s Q1 2025 Earnings Preview: Navigating Headwinds in a Shifting Auto Landscape

BorgWarner (BW), a key player in automotive drivetrain and powertrain systems, faces a challenging 2025 as global light-vehicle production slows and currency pressures mount. While Q1 2025 earnings estimates point to a near-term contraction, the company’s strategic bets on electrification and hybrid technologies position it to outperform peers in the long run. Here’s what investors need to know.

The Near-Term Outlook: Revenue Declines, But Margins Hold Firm

BorgWarner’s Q1 2025 earnings are expected to show a 5.4% year-over-year drop in revenue to $3.4 billion, with EPS projected at $0.97, down 5.8% from 2024’s $1.03. These figures reflect a slowdown in global automotive markets, where BorgWarner anticipates 1–3% volume declines in 2025.

But the company isn’t just weathering the storm—it’s maintaining its financial discipline. Full-year 2025 adjusted operating margins are expected to stay robust at 10.0–10.2%, despite currency headwinds that could slice sales by $410 million. This resilience is critical as competitors grapple with similar pressures.

Betting on Electrification: New Contracts Signal Long-Term Strength

BorgWarner’s recent wins underscore its focus on the $460 billion EV and hybrid market. In Q1/Q2 2025, the company secured:
- Four eMotor programs with Chinese OEMs for plug-in hybrids and EVs, launching by 2026.
- A high-voltage coolant heater contract with a global automaker, targeting PHEV thermal efficiency.
- Extended partnerships for turbochargers in North American SUVs and variable cam timing systems for hybrid engines.

These contracts are pivotal. The EV transition isn’t just about batteries—it’s about components like eMotors and thermal management systems, where BorgWarner holds significant IP. Analysts estimate these wins could add $1.5–2.0 billion in annual revenue by 2030, far outweighing near-term headwinds.

Risks and Roadblocks: Currency, Impairments, and Analyst Divisions

BorgWarner isn’t without vulnerabilities. The Euro’s 8% decline against the dollar in 2024 and weak Asian currencies have already dented top-line growth. Additionally, $646 million in Q4 2024 impairments in its PowerDrive and Battery divisions suggest challenges in traditional automotive segments.

Analysts are split. Goldman Sachs upgraded BW to Buy, citing its $1.3–1.4 billion free cash flow and 13.8% EPS growth forecast for 2025. Conversely, UBS downgraded to Neutral, warning of macroeconomic risks and delayed EV adoption in China.

The Bottom Line: A Hold with Upside Potential

BorgWarner’s Q1 results will likely confirm a tough start to 2025, but its strategic moves in electrification and hybrid tech make it a hold with long-term upside. Key catalysts include:
- 2025 EPS growth of 13.8% to $4.05–$4.40, supported by margin discipline and new contracts.
- $650–750 million in free cash flow, enabling dividend payments (up 13 years straight) and share buybacks.
- A forward P/E of 7.06, nearly half its five-year average, suggesting undervaluation.

While near-term risks linger, BorgWarner’s ability to outpace a shrinking market and capitalize on EV trends makes it a critical play in the automotive supply chain. Investors should focus less on quarterly noise and more on its $13–14 billion revenue runway through 2025—and beyond.

In conclusion, BorgWarner’s Q1 2025 preview is a mixed bag, but the company’s strategic investments and financial flexibility position it to thrive as the automotive industry evolves. With a strong balance sheet and a pipeline of high-margin EV contracts, BW is worth watching—even as the road ahead remains bumpy.