LEA Vs. GNTX: Which Stock is Poised for Better Q4 Earnings?

Fourth-quarter 2017 earnings season is in full swing. A number of companies from different sectors have already reported results. The earnings results from the Auto sector have also started pouring in. In fact, domestic auto giant, Ford Motor Company F has already come up with fourth-quarter 2017 results. During the quarter, the company posted adjusted earnings per share of 39 cents, missing the Zacks Consensus Estimate of 42 cents per share.

Oshkosh Corporation OSK is expected to report first-quarter fiscal 2018 financial results on Jan 25, 2018. Two auto companies which are expected to report fourth-quarter and full-year 2017 earnings results on Jan 26 are Lear Corp. LEA and Gentex Corporation GNTX.

As of Jan 24, per the latest Earnings Outlook, 89 S&P 500 members have already revealed their quarterly earnings results. Of these companies, the beat ratios of earnings and revenues are 80.9% and 74.2%, respectively.

For fourth-quarter 2017, the auto sector is expected to register 12% year-over-year rise in earnings and 5.1% year-over-year decline in revenues. However, companies under the S&P 500 category is expected to come up with 10.8% and 7.3% year-over-year growth in earnings and revenues, respectively.

Let’s take a look at the two auto companies, Lear and Gentex Corporation that are scheduled to announce quarterly results on Jan 26.

We relied on the Zacks methodology, combining a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) with a positive Earnings ESP, to predict the chances of an earnings beat this quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Per our proprietary methodology, Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that with an ideal combination of the two key ingredients — Zacks Rank and ESP — chances of a positive earnings surprise are as high as 70% for the stocks lined up for an earnings announcement.

Southfield, MI-based Lear is a top supplier of automotive seating and electrical systems. Last quarter, the company delivered a positive earnings surprise of 4.2%. In fact, the company delivered a positive earnings surprise in each of the trailing four quarters, the average beat being 7.5%.

Lear Corporation has a long-term growth rate of 7.1%. Our model predicts that the company is not likely to deliver an earnings beat this time around, as it has an Earnings ESP of -0.62% and a Zacks Rank #3. (Read more: Lear Corp to Report Q4 Earnings: What's in the Cards?).

Lear Corporation Price and EPS Surprise

Zeeland, MI-based Gentex Corporation is a leading supplier of vision-related features to the global automotive industry. Our model predicts that the company is not likely to deliver an earnings beat this time around, as it has an Earnings ESP of -1.96% and a Zacks Rank #3.

Last quarter, the company delivered in-line results. In fact, in the trailing four quarters, the company beat earnings once, missed twice and posted in-line result on one occasion, with an average beat of 0.05%. Lear Corporation has a long-term growth rate of 9.7%

So, per our proprietary model, both Lear and Gentex Corporation are not likely to come up with earnings beat in fourth-quarter 2017.

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