BWA BorgWarner Inc

Moody’s Investors Service, the credit rating agency of Moody's Corporation (MCO), has upgraded the credit rating of BorgWarner Inc. (BWA) stating that the company’s growth could surpass the industry growth given its competitive product offerings and focus on fuel economy improvements.

The rating agency has upgraded its senior unsecured ratings on BorgWarner from“Baa3” to “Baa2”, which is a one-notch rise in the investment-grade category. It has also affirmed the rating outlook as “Stable”.

Moody’s pointed out that BorgWarner’s revenue rose 15% (excluding the impact of acquisitions and currency fluctuations) during the second quarter of the year despite a  2% fall in global light vehicle production during the same period on the back of weakening demand and negative impact of earthquake in Japan.

Michigan-based BorgWarner is a leading manufacturer of powertrain products for the world's major automakers. Its products include four-wheel-drive and all-wheel-drive transfer cases (primarily for light trucks and sport utility vehicles or SUVs), as well as automatic transmission and timing chain systems. Its largest customers include Volkswagen (VLKAY) and Ford Motor Co. (F).

The Zacks #3 Rank (Hold) company reported a 44% increase in profit to $1.12 per share in the second quarter of 2011 from 78 cents per share (both excluding a non-recurring item) in the same quarter of prior year. The profit exceeded the Zacks Consensus Estimate by 14 cents per share.

The 15% increase in sales (excluding the impact of currency and sales related to the acquisition of Haldex Traction Systems) during the quarter was driven by higher global demand for advanced powertrain technology, focus on fuel economy, and emissions reductions.

For full year 2011, BorgWarner expects sales to grow by 25% to 28%, up from the previous outlook of 19% to 23%. The company also raised its EPS guidance to $4.25-$4.45 from $3.85-$4.15. The improved guidance was driven by new business growth and better cost control measures.

 
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