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BorgWarner (BWA) Q4 Earnings: A Disappointment in Store?

BorgWarner Inc.BWA is set to release its fourth-quarter 2016 results before the market opens on Feb 9. Last quarter, the company posted a positive earnings surprise of 1.30%. It has delivered a positive surprise in each of the trailing four quarters, with an average of 2.30%. Let's see how things have shaped up for the forthcoming announcement.

Factors Influencing this Quarter

BorgWarner expects fourth-quarter 2016 earnings per share to be in the range of 82-86 cents, higher than the 75 cents earned in the fourth-quarter 2015. Net sales growth for the quarter is projected in the range of 14.3-17.8%. Excluding the impact of foreign currencies and the Remy International buyout, the year-over-year increase in net sales for the quarter is expected in the range of 3-5%. Moreover, a healthy balance sheet and ample cash flow help BorgWarner to return capital to shareholders. These efforts are likely to impact earnings per share positively.

However, BorgWarner is expected to be negatively impacted due to the sale of the Remy light vehicle aftermarket business. Moreover, the company is also subject to currency headwinds. The company is also seeing stiff competition in technological innovation, product launches and price among other factors, from companies that face lower costs.

BorgWarner Inc. Price and EPS Surprise

BorgWarner Inc. Price and EPS Surprise | BorgWarner Inc. Quote

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 Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) 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. BorgWarner's Earnings ESP is +1.19% because the Most Accurate estimate is 85 cents, while the Zacks Consensus Estimate is pegged at 84 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

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

Price Performance

BorgWarner has underperformed the Zacks categorized Auto/Truck Original Equipment industry over the last three months. The company's shares have gained 15.3% in the period, compared with a 17% gain recorded by the industry.

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:

Fox Factory Holding Corp FOXF , expected to report fourth-quarter 2016 financial results on Mar 6, has an Earnings ESP of +6.67% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Magna International Inc. MGA has an Earnings ESP of +0.74% and a Zacks Rank #3. The company's fourth-quarter 2016 financial results are expected to release on Feb 24.

Visteon Corporation VC has an Earnings ESP of +4.44% and a Zacks Rank #3. The company's fourth-quarter 2016 results are expected to release on Feb 23.

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BorgWarner Inc. (BWA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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