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BorgWarner (BWA) to Post Q3 Earnings: What's in the Offing?

BorgWarner Inc. BWA is slated to release third-quarter 2020 results on Oct 29, before the bell. The Zacks Consensus Estimate for the quarter’s loss is pegged at 74 cents per share on revenues of $2.38 billion.

This automotive equipment supplier posted a narrower-than-expected loss in the last reported quarter, mainly aided by solid revenues across both segments of the company.
 
BorgWarner beat estimates in each of the trailing four quarters, the average surprise being 36.19%. This is depicted in the graph below:

BorgWarner Inc. Price and EPS Surprise

BorgWarner Inc. Price and EPS Surprise

BorgWarner Inc. price-eps-surprise | BorgWarner Inc. Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for BorgWarner’s third-quarter earnings per share witnessed an upward revision of nine cents to 74 cents in the past 30 days. However, this compares unfavorably with the year-ago quarter’s earnings of 96 cents per share, indicating a 22.9% decline, year on year. Further, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year fall of 4.6%.

Earnings Whispers

Our proven Zacks model does not conclusively predict an earnings beat for BorgWarner this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here as elaborated below.
 
Earnings ESP: BorgWarner has an Earnings ESP of -0.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BorgWarner currently holds a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors at Play

The coronavirus pandemic has significantly affected the auto sector with factory closure, low footfall in dealerships and supply-chain disruptions. Depressed demand of vehicles and weak consumer confidence amid the coronavirus mayhem are likely to have impacted the company’’s third-quarter earnings and sales.

Notably, the Zacks Consensus Estimate for the Engine segment’s quarterly pretax earnings is pinned at $214 million compared with the prior-year quarter’s profit of $241 million. The consensus estimate for the segment’s quarterly net sales is pegged at $1,487 million, down from the year-ago quarter’s $1,514 million.

The Zacks Consensus Estimate for its Drivetrain segment’s quarterly net sales is pegged at $964 million, suggesting a decline from the $993 million reported in the year-ago quarter. The consensus estimate for the segment’s pretax earnings is pinned at $80 million comparing unfavorably with the profit of $100 million witnessed in the prior-year period.

Further, decline in light-vehicle production across all major markets served, along with unfavorable foreign-currency translation impact, might have dented its margins to some extent during the July-September period.

Nonetheless, BorgWarner’s expansion efforts, product launches, strategic collaborations and solid backlog are likely to have aided its third-quarter performance.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Lear Corporation LEA has an Earnings ESP of +2.78% and currently sports a Zacks Rank of 1, at present. It is scheduled to report earnings results on Nov 30.

General Motors GM has an Earnings ESP of +1.25% and carries a Zacks Rank of 3 currently. The company will announce quarterly figures on Nov 5.

Cooper Tire Rubber Company CTB has an Earnings ESP of +22.1% and currently holds a Zacks Rank #3. The company is slated to release quarterly numbers on Oct 29.

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BorgWarner Inc. (BWA): Free Stock Analysis Report
 
Cooper Tire Rubber Company (CTB): Free Stock Analysis Report
 
General Motors Company (GM): Free Stock Analysis Report
 
Lear Corporation (LEA): 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.

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