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Will Delphi Automotive's (DLPH) Earnings Surprise in Q1?

Delphi Automotive PLC DLPH is set to report first-quarter 2016 results on May 4. In the last quarter, the company had delivered a positive earnings surprise of 1.46%.

Delphi Automotive beat earnings estimates in three of the trailing four quarters, resulting in a positive average surprise of 0.97%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Delphi Automotive regularly undertakes acquisitions and alliances to enhance its technological capability, increase operating scale, augment its client base and expand geographically. In Dec 2015, the company completed the acquisition of HellermannTyton Group PLC, a leading global manufacturer of cable management solutions. The transaction is expected to boost Delphi Automotive’s earnings by 15 cents per share, excluding one-time integration expenses, from 2016. Some of the incremental earnings will likely be visible in the company’s first-quarter results.

On the flip side, the loss of revenues from the divested Thermal Systems business is negatively impacting Delphi Automotive’s top line. Moreover, economic weakness in South America is leading to lower production in the region by original equipment manufacturers. This can adversely affect Delphi Automotive’s sales.

For 2016, Delphi Automotive expects revenues, adjusted earnings per share, adjusted operating income and operating cash flow to increase over 2015. This raises hopes for good results in the first quarter.

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: Earnings ESP for Delphi Automotive is 0.00% because the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.34.

Zacks Rank: Delphi Automotive carries a Zacks Rank #2 (Buy). Though a Zacks Rank 2 increases the predictive power of ESP, 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

Ferrari N.V. RACE has an Earnings ESP of +12.50% and a Zacks Rank #3 (Hold). The company will report first-quarter 2016 financial numbers on May 2.

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.

Nissan Motor Co. Ltd. NSANY – a Zacks Rank #1 (Strong Buy) stock – will report its fourth-quarter and fiscal 2015 (ended Mar 31, 2016) financial numbers on May 12.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NISSAN ADR (NSANY): Free Stock Analysis Report
AMER AXLE & MFG (AXL): Free Stock Analysis Report
DELPHI AUTO PLC (DLPH): Free Stock Analysis Report
FERRARI NV (RACE): Free Stock Analysis Report
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