BorgWarner Inc. BWA is set to report first-quarter 2015 results on Apr 30. In the last quarter, the company had delivered an earnings surprise of 0.00%. Let's see how things are shaping up for this announcement.
Factors Influencing This Quarter
For 2015, BorgWarner’s net sales are expected to increase in the range of 2%–6%, driven by the demand for the company’s product technologies which enhance fuel economy, emissions and performance. Excluding the impact of weak foreign currency, net sales for 2015 are projected to increase 9.5%–12%.
Net earnings for 2015 are expected to rise to $3.35–$3.55 per share from $3.25 recorded in 2014. These raise expectations of higher revenues and earnings in the first quarter as well.
However, BorgWarner faces stiff competition in the areas of technological innovation, application engineering development, quality, price, delivery and product launches. It also faces intense pressure from original equipment manufacturers to reduce the prices of its products. This will likely affect the company’s profit margins.
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, 2 or 3 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 -1.19% because the Most Accurate estimate of 83 cents stands below the Zacks Consensus Estimate of 84 cents.
Zacks Rank: BorgWarner’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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:
American Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +3.45% and a Zacks Rank #1 (Strong Buy). The company’s first-quarter 2015 financial results are scheduled for release on May 1.
Gentherm Inc. THRM has an Earnings ESP of +2.00% and a Zacks Rank #2 (Buy). The company will report first-quarter 2015 earnings on Apr 30.
Cooper Tire & Rubber Co. CTB has an Earnings ESP of +1.37% and a Zacks Rank #3. The company’s first-quarter 2015 financial results are scheduled for release on May 1.
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