Auto Suppliers Get It In Gear On Bullish Note

- Apr 17, 2018 -

Auto-supply stocks are trading higher on Monday, driven by a bullish note from Cowen & Co.

Analyst Jeffrey Osborne initiated coverage of BorgWarner (BWA), Delphi Automotive (DLPH), and Visteon (VC) with Outperform ratings today with respective price targets of $60, $64, and $136.

For BorgWarner, Osborne writes that he's upbeat about the company's positioning as the auto industry shifts toward more fuel-efficient vehicles, as it has a strong presence in turbos, hybrids and 48-volt systems. Longer term, he expects that BorgWarner will engage in M&A to fill gaps in its electric-vehicle portfolio "to capture more Auto 2.0 opportunities."

As for Delphi, Osborne expects that it can outperform as the company is levered to more-efficient autos near term and hybrid and electric vehicles long term. He sees above-market sales growth accelerating in 2020, thanks to higher content per vehicle, as well as higher margins "as the company optimizes its footprint post-spin and gains scale in power electronics."

Finally, he sees higher margins for Visteon, thanks to digitalization trends in the infotainment space, which should also unlock new businesses for the supplier. Osborne is enthusiastic about its SmartCore and DrivCore domain-controller platforms, which he believes will benefit over the long term, given the electronic control unit consolidation (ECU) trend.

All three stocks are trading higher this afternoon, with BorgWarner up 2% to $53.92, Delphi climbing 1.3% to $49.66, and Visteon gaining 3.3% to $115.65.  The Consumer Discretionary Select Sector SPDR (XLY) is 1.1% higher to $102.32.

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