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Delphi (DLPH) to Report Q3 Earnings: A Surprise in Store? (revised)

Delphi Automotive PLC DLPH is set to report third-quarter 2017 results on Nov 2, before the market opens. Last quarter, the company delivered a positive earnings surprise of 3.64%.

Going by its impressive earnings history, the company beat estimates in  the trailing four quarters, delivering an average positive earnings surprise of 8.14%.

Let’s see how things are shaping up for this announcement.

Delphi Automotive PLC Price and EPS Surprise

 

Factors to Consider

In a bid to remain ahead of its peers, Delphi has been indulging in frequent acquisitions and alliances with many companies to try and develop self-driving solutions and electric vehicle technology. Recently, in October, the company bought a self-driving tech entity known as, nuTonomy for $450 million, which will help the company expedite its developmental process of autonomous vehicles.

Delphi has announced its plan to split into two companies by March 2018. After the separation, this split might help the company concentrate on two independent divisions, enabling it to invest and grow faster. However, in the short term, this move might affect company’s revenues.

Also, for third-quarter 2017, Delphi decreased its revenue guidance to $4-$4.1 billion compared with the previous expectation of $4.15-$4.25 billion. The adjusted earnings per share have also been lowered and expected to be within $1.52-$1.58 range compared with the previous projection of $1.62-$1.68.

Adjusted operating income is anticipated in the range of $520-$540 million (13.1% of sales) compared with the previous outlook of $560-$580 million (13.5-13.7% of sales) in third-quarter 2017.

For the soon-to-be-released quarterly results, the Zacks Consensus Estimate for net sales of Electrical/Electronic Architecture segment is pegged at $2.22 billion, down from the second quarter’s actual net sales of $2.35 billion.

Similarly, the Zacks Consensus Estimate for net sales of the company’s Powertrain Systems segment stands at $1.11 billion, down from the second quarter’s actual net sales of $1.19 billion.

Earnings Whispers

Our proven model does not conclusively show that Delphi is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below:

Zacks ESP: Delphi has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.56. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Delphi carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Price Performance

Last three months, shares of Delphi have underperformed the industry it belongs to. The stock has gained 9.4% compared with the industry’s 14.2% growth.

 



Stocks to Consider

Here are a few stocks worth considering from the same space with the right combination of elements to come up with an earnings beat in their respective quarters:

American Axle & Manufacturing Holdings, Inc. AXL has an Earnings ESP of +3.99% and carries a Zacks Rank #3 as well. The company is expected to report third-quarter 2017 results on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meritor, Inc. MTOR has an Earnings ESP of +4.26% and flaunts a Zacks Rank of 1. The company’s fourth-quarter 2017 results are expected to release on Nov 15.

Adient PLC ADNT has an Earnings ESP of +0.62% and a Zacks Rank #2. The company’s fourth-quarter 2017 results are expected to release on Nov 2.

(NOTE: We are reissuing this article to correct a mistake. The original article, issued yesterday, October 31, 2017, should no longer be relied upon.)

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American Axle & Manufacturing Holdings, Inc. (AXL): Free Stock Analysis Report
 
Delphi Automotive PLC (DLPH): Free Stock Analysis Report
 
Meritor, Inc. (MTOR): Free Stock Analysis Report
 
Adient PLC (ADNT): Free Stock Analysis Report
 
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