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BorgWarner (BWA) Q3 Earnings: Will the Stock Disappoint?

Zacks Equity Research
Updated

BorgWarner Inc. BWA is set to release its third-quarter 2016 results before the market opens on Oct 27. Last quarter, the company posted a positive earnings surprise of 2.44%. It has delivered a positive surprise in each of the trailing four quarters, with an average of 2.68%. Let’s see how things have shaped up for the forthcoming announcement.

Factors Influencing this Quarter

BorgWarner expects third-quarter 2016 earnings per share to be in the range of 74–81 cents. Net sales growth for the quarter is projected in the range of 13%–20.8%. Excluding the impact of foreign currencies and the Remy International buyout, the year-over-year increase in net sales for the quarter is expected in the range of 2.5%–7.7%. Moreover, a healthy balance sheet and ample cash flows help BorgWarner to return capital to shareholders. These efforts also positively impact earnings per share.

However, the negative impact from foreign currencies poses concerns. The company projects an adverse impact of 10–220 basis points on net sales related to foreign currencies in the third quarter.

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BORG WARNER INC Price and EPS Surprise

 

BORG WARNER INC Price and EPS Surprise | BORG WARNER INC Quote

Earnings Whispers

Our proven model does not conclusively show that BorgWarner is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. BorgWarner’s Earnings ESP is -1.30% because the Most Accurate estimate is 76 cents, while the Zacks Consensus Estimate is pegged at 77 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: BorgWarner’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Fox Factory Holding Corp FOXF, expected to report third-quarter 2016 financial results on Nov 2, has an Earnings ESP of +2.56% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Magna International Inc. MGA has an Earnings ESP of +1.67% and a Zacks Rank #2. The company’s third-quarter 2016 financial results are expected to release on Nov 3.

Visteon Corporation VC has an Earnings ESP of +9.46% and a Zacks Rank #3. The company’s third-quarter 2016 results are expected to release on Oct 27.

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BORG WARNER INC (BWA): Free Stock Analysis Report
 
MAGNA INTL CL A (MGA): Free Stock Analysis Report
 
VISTEON CORP (VC): Free Stock Analysis Report
 
FOX FACTORY HLD (FOXF): Free Stock Analysis Report
 
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Zacks Investment Research