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BorgWarner (BWA) Q1 Earnings: Is a Surprise in Store?

BorgWarner Inc. BWA is set to report first quarter 2016 results on Apr 28. In the last quarter, the company delivered a positive earnings surprise of 4.17%. Let us see how things are shaping up for this announcement.

Factors Influencing This Quarter

BorgWarner expects net sales growth for first-quarter 2016 to be in the range of 8.3%–13.3%. The Remy International acquisition is expected to have a positive impact of $247–$257 million, or 12.4%–13%. 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, excluding the impact of weaker foreign currencies and the Remy International buyout, the year-over-year change in net sales for the first quarter is estimated to range between a decline of 0.3% and an increase of 2.7%. The earnings guidance (excluding the Remy International acquisition) is in a range of 72 cents–76 cents per share, down 2%–8% from 78 cents earned in first quarter 2015.

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 http://www.zacks.com/earnings/earnings-surprise-predictions/">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: BorgWarner has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 79 cents.

Zacks Rank: BorgWarner carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 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:

Ford Motor Co. F has an Earnings ESP of +11.63% and a Zacks Rank #3 (Hold). The company is expected to report first-quarter 2016 results on Apr 28.

American Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +7.04% and a Zacks Rank #3. The company’s first quarter 2016 financial results are scheduled for release on May 6.

Ferrari N.V. RACE has an Earnings ESP of +12.5% and a Zacks Rank #3. The company will report first quarter 2016 financial numbers on May 2.

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BORG WARNER INC (BWA): Free Stock Analysis Report
 
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