Delphi Automotive PLC (DLPH) is set to report fourth-quarter 2014 results on Feb 5. In the last quarter, it had posted a positive earnings surprise of 2.65%. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Delphi Automotive is one of the largest vehicle parts manufacturers in the world. The company regularly undertakes acquisitions and alliances to enhance its technological capability, increase its operating scale, augment its client base and expand geographically. This helps boost the company’s earnings.
However, Delphi Automotive’s sales are dependent on vehicle production and sales volumes of automakers. Economic weakness in South America is leading to production cuts in the region by original equipment manufacturers (OEMs). This is adversely affecting Delphi Automotive’s sales in the region.
Earnings Whispers
Our proven model does not conclusively show that Delphi Automotive 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. Delphi Automotive’s Earnings ESP is -0.79% as the Most Accurate estimate stands at $1.25 while the Zacks Consensus Estimate is pegged at $1.26.
Zacks Rank: Delphi Automotive’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:
O'Reilly Automotive Inc. (ORLY) has an Earnings ESP of +2.40% and a Zacks Rank #2 (Buy). The company will report its fourth-quarter 2014 results on Feb 4.
American Axle & Manufacturing Holdings Inc. (AXL) has an Earnings ESP of +1.85% and a Zacks Rank #2. The company’s fourth-quarter financial results are scheduled for release on Feb 6.
Magna International Inc. (MGA) has an Earnings ESP of +0.90% and a Zacks Rank #3. It will release its fourth-quarter earnings results on Feb 25.
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