Is BorgWarner Stock Engineered To Make You Money?

BorgWarner (BWA) stock returned 37.7% over the past year, compared with 17.4% for the S&P 500. All the while the company steadily bought back its own stock. The diluted share count fell 12% in three years, leaving each remaining share with a larger stake in the business. Yet BorgWarner earns less today than it did three years ago. So what has the smaller share count done for the earnings behind each share?

What Has BorgWarner’s Buyback Done For Each Share?

The buyback program slowed a decline in earnings per share, but it has not turned that drop into growth. BorgWarner reduced its diluted shares from 234 million in the twelve months to June 2023 to 206 million in the twelve months to June 2026. Net income fell an average of 24.1% a year over those three years. Earnings per share fell less, at about 21% a year on average, as the company divided a smaller profit among fewer shares.

The most recent year demonstrates the same effect working upward. Net income climbed 97.6% in the twelve months to June 2026, while earnings per share grew faster at 109.5%. Net of the cost of stock pay, BorgWarner repurchased shares equal to 5.0% of its market value over that year. An investor’s share count remains constant. The fraction of the company each share represents grows, and the value of that fraction still depends on the share price.

BorgWarner Funds Its Buyback From Car Parts Cash

BorgWarner supplies parts to automakers, generating most of its revenue from two primary divisions. Turbos & Thermal Technologies posted $5.77 billion of revenue in fiscal 2025, and Drivetrain & Morse Systems added $5.65 billion. The profit on those sales is modest: the operating margin was 9.9% over the past twelve months, compared with 18.5% for the S&P 500.

Cash generation is stronger than the profit line suggests. BorgWarner produced $1.24 billion of free cash flow over the past twelve months, covering its buybacks and dividend payments 1.6 times. Suppliers also help. BorgWarner owed them $2.14 billion at the end of June 2026. That amount was 1.7 times the inventory the company held, meaning it effectively finances its stock of parts on supplier credit.

Can BorgWarner Keep Shrinking Its Share Count?

The balance sheet leaves room for further repurchases. BorgWarner carried net debt at 1.1 times its annual EBITDA, a measure of operating earnings, and operating profit covered its interest costs 14.6 times. The board raised the buyback authorization in August. Management said the $1.35 billion total represents just over 10% of the company’s market value.

The weak spot is the car market. Management expects BorgWarner’s end markets to be flat to down 3% in 2026, and expects its battery sales to decline. The company also projects free cash flow of $900 million to $1.1 billion for 2026, adding that it will always put investment in its own growth ahead of buybacks. The repurchase program will therefore last only as long as the cash remaining after that investment. BorgWarner’s free cash flow is the number to watch in its next report, expected on or around October 29, 2026.

Does This Mean You Should Act On BWA?

Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

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