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Will Delphi Automotive's (DLPH) Earnings Disappoint in Q3?

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Delphi Automotive PLC is set to report third-quarter 2016 results on Nov 2. In the last quarter, the company posted a positive earnings surprise of 2.58%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Delphi Automotive is one of the largest vehicle parts manufacturers in the world. The company’s innovative products have helped it secure all 25 leading global automobile manufacturers as customers. Delphi Automotive regularly undertakes acquisitions and alliances to enhance its technological capability, increase operating scale, augment its client base and expand geographically. The HellermannTyton Group acquisition has been boosting the company’s earnings. 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 third quarter.

On the flip side, the absence of revenues from the Thermal Systems business and the stake in Shanghai Delphi Automotive Air-Conditioning System Co., Ltd, both of which have been sold, has been 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. Delphi Automotive expects weak vehicle production in the second half of the year, particularly in China. It also projects weaker light-duty diesel volumes in both Europe and the emerging markets this year. Even the global commercial vehicle market remains soft. These factors can adversely affect Delphi Automotive’s sales.

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: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Delphi Automotive’ Earnings ESP is +1.41% because the Most Accurate estimate stands at $1.44, while the Zacks Consensus Estimate is pegged at $1.42. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

DELPHI AUTO PLC Price and EPS Surprise

 

DELPHI AUTO PLC Price and EPS Surprise | DELPHI AUTO PLC Quote

Zacks Rank: Delphi Automotive carries a Zacks Rank #4 (Sell). 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:

American Axle & Manufacturing Holdings Inc. (AXL - Free Report) , which is expected to report third-quarter 2016 results on Nov 4, has an Earnings ESP of +5.20% and a Zacks Rank #3 (Hold).

Fox Factory Holding Corp (FOXF - Free Report) , which will report third-quarter 2016 financial numbers on Nov 2, has an Earnings ESP of +2.56% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Magna International Inc. (MGA - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #2. The company is expected to release third-quarter 2016 results on Nov 3.

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