BorgWarner (NYSE: BWA) and Tenneco (NYSE:TEN) are both mid-cap auto/tires/trucks companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, institutional ownership, profitability, valuation, analyst recommendations, risk and dividends.

Analyst Recommendations

This is a breakdown of recent ratings for BorgWarner and Tenneco, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BorgWarner 3 8 4 0 2.07
Tenneco 1 4 4 0 2.33

BorgWarner currently has a consensus target price of $43.36, suggesting a potential downside of 16.72%. Tenneco has a consensus target price of $66.63, suggesting a potential upside of 5.96%. Given Tenneco’s stronger consensus rating and higher probable upside, analysts clearly believe Tenneco is more favorable than BorgWarner.

Valuation and Earnings

This table compares BorgWarner and Tenneco’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
BorgWarner $9.27 billion 1.19 $1.54 billion $0.89 58.50
Tenneco $8.86 billion 0.38 $630.00 million $5.07 12.40

BorgWarner has higher revenue and earnings than Tenneco. Tenneco is trading at a lower price-to-earnings ratio than BorgWarner, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares BorgWarner and Tenneco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BorgWarner 2.06% 20.75% 8.17%
Tenneco 3.17% 54.06% 7.95%

Insider & Institutional Ownership

91.1% of BorgWarner shares are held by institutional investors. Comparatively, 94.4% of Tenneco shares are held by institutional investors. 0.7% of BorgWarner shares are held by insiders. Comparatively, 2.7% of Tenneco shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

BorgWarner pays an annual dividend of $0.56 per share and has a dividend yield of 1.1%. Tenneco pays an annual dividend of $1.00 per share and has a dividend yield of 1.6%. BorgWarner pays out 62.9% of its earnings in the form of a dividend. Tenneco pays out 19.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Tenneco has raised its dividend for 2 consecutive years. Tenneco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

BorgWarner has a beta of 1.76, indicating that its share price is 76% more volatile than the S&P 500. Comparatively, Tenneco has a beta of 1.85, indicating that its share price is 85% more volatile than the S&P 500.

Summary

Tenneco beats BorgWarner on 11 of the 16 factors compared between the two stocks.

BorgWarner Company Profile

BorgWarner Inc. is engaged in providing technology solutions for combustion, hybrid and electric vehicles. The Company’s segments include Engine and Drivetrain. The Engine segment’s products include turbochargers, timing devices and chains, emissions systems and thermal systems. The Engine segment develops and manufactures products for gasoline and diesel engines, and alternative powertrains. The Drivetrain segment’s products include transmission components and systems, all-wheel drive (AWD) torque transfer systems and rotating electrical devices. The Company’s products are manufactured and sold across the world, primarily to original equipment manufacturers (OEMs) of light vehicles (passenger cars, sport-utility vehicles (SUVs), vans and light trucks). The Company’s products are also sold to other OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications.

Tenneco Company Profile

Tenneco Inc. is a producer of clean air and ride performance products and systems for light vehicle, commercial truck, off-highway and other vehicle applications. The Company designs, manufactures and distributes highly engineered products for both original equipment vehicle manufacturers (OEMs) and the repair and replacement markets, or aftermarket, across the world. The Company operates through six segments: North America Clean Air; North America Ride Performance; Europe, South America and India Clean Air; Europe, South America and India Ride Performance; Asia Pacific Clean Air, and Asia Pacific Ride Performance. The Company serves both original equipment (OE) vehicle designers and manufacturers and the repair and replacement markets, or aftermarket, globally through brands, including Monroe, Rancho, Clevite Elastomers, Axios, Kinetic and Fric-Rot ride performance products and Walker, XNOx, Fonos, DynoMax and Thrush clean air products.

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