The market was pleased with the recent earnings report from BorgWarner Inc. (NYSE:BWA), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.NYSE:BWA Earnings and Revenue History May 15th 2025

The Impact Of Unusual Items On Profit

To properly understand BorgWarner's profit results, we need to consider the US$814m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. BorgWarner took a rather significant hit from unusual items in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On BorgWarner's Profit Performance

As we mentioned previously, the BorgWarner's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that BorgWarner's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing BorgWarner at this point in time. For example - BorgWarner has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of BorgWarner's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or  this list of stocks with high insider ownership.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

View Comments