Auburn Hills, Michigan – Shares of BorgWarner (NYSE: BWA) have dipped to new lows after experiencing sluggish growth and losses in its electric vehicle (EV) business. This setback contrasts with earlier hopes that the EV segment would drive significant growth for the company.

The company’s fourth quarter sales increased by 6% to $3.52 billion, but raw material costs limited gross margins to 18%. Operating margins were respectable at 8% of sales, but adjusted operating profits fell to $0.90 per share. This marked a noticeable slowdown from the 12% revenue growth reported for the year, with sales totaling $14.2 billion.

BorgWarner’s Air Management segment accounts for 55% of sales, while Drivetrain & Battery Systems makes up 30% and ePropulsion contributes around 15%. However, the ePropulsion business generated significant losses, representing about 4% of sales.

Despite positive developments such as a strategic relationship with FinDreams Battery and new product awards, the company’s outlook for 2024 only anticipates a 1-5% increase in sales compared to 2023, with eProduct sales making up around 18% of total sales.

BorgWarner’s transition to electrification has been accompanied by significant acquisitions, including a $3.3 billion deal for Delphi in 2020 and several other deals for electrical expertise and battery pack design and manufacturing. The company also spun off its Fuel System and Aftermarket business last summer in a bid to become more resilient in the face of industry shifts.

While BorgWarner faces challenges in the transition to EV technology, it continues to trade at a modest earnings multiple, with analysts expressing caution about the company’s long-term growth prospects. The company’s transition to electrification is still in its early stages and investors are advised to approach with caution despite the apparent cheapness of the stock.

Amidst these challenges, BorgWarner’s future growth remains uncertain, with the company’s transition to EV technology posing significant cash flow requirements and potential limitations on future valuations. As the transition progresses, investors should proceed with caution when evaluating BorgWarner’s stock.