Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

BorgWarner Inc. (BWA), Gentex Corporation (GNTX), Tenneco Inc (TEN): Automotive Suppliers – Performance Review, Part Two

This is the second part of my review of the recovering automotive suppliers industry. The companies within this industry are facing an era of changing demand. Products need to be replaced and redesigned due to stricter safety and environmental regulations.

Let’s review another three automotive suppliers are see how they are performing.

Strong performance despite Europe’s weak demand

BorgWarner Inc. (NYSE:BWA)BorgWarner Inc. (NYSE:BWA) is a global supplier of motor vehicle parts and systems, primarily for power-train applications.

The company reported net earnings of $1.22 per diluted share for the first-quarter, six cents down from last year. Net sales reached $1.85 billion, a 3% decrease compared with the first quarter of 2012. Despite the results, management has not changed its projections of annual sales growth between 2% and 6%.

BorgWarner Inc. (NYSE:BWA) is putting its focus on fuel economy and improved emissions products like DualTronic, a dual-clutch transmission system that gives a 15% increase in fuel efficiency. The company expects its demand to triple, reaching 8 million units by 2016. In addition, operational efficiency and cost controls enabled BorgWarner to raise its operating margin to 11.7%, despite the challenging sales environment. I strongly support these initiatives.

However, BorgWarner Inc. (NYSE:BWA)’s dependence on light-vehicle production in Europe, a market that comprises nearly half of its sales, more than offsets growth in other categories. Plus, strong competition in path-breaking categories and continuous pricing pressure limits profits.

A market-share king of a growing kingdom

Gentex Corporation (NASDAQ:GNTX) creates and produces electrochromic auto-dimming rear-view and side mirrors, and camera-based lighting-assist features for the global automotive industry.

The company’s net sales for the first quarter decreased 7% compared to prior-year’s quarter, driven primarily by annual customer price reductions. Gentex experienced an increased penetration of its auto-dimming mirrors which was offset by lower light vehicle production in Europe and Japan/Korea.

Gentex Corporation (NASDAQ:GNTX) has strong growth prospects for its mirrors, as 23% of current worldwide vehicle production includes interior auto-dimming mirrors. This percentage is expected to grow to 45% in 10 to 12 years, as some features will become standard. There are also prospects to bring Gentex’s technology to office and airplane windows over the long term. The company signed contracts to supply auto-dimming passenger windows for Boeing.

R&D investment is key for the company as it allows it to maintain competitive advantage. Having more than 700 patents worldwide, some valid through 2031, Gentex Corporation (NASDAQ:GNTX) has a dominant market share of 88%. This narrow economic moat should be able to protect the company for a long time. In addition, Gentex has a debt-free balance sheet and enough cash flow to allow the company to keep investing and growing.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.