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BorgWarner (BWA) to Report Q4 Earnings: What's in Store?

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BorgWarner Inc. (BWA - Free Report) is set to report fourth-quarter and full-year 2017 results, before market open on Feb 8.

Last quarter, the company delivered a positive earnings surprise of 9.2%. In fact, the company delivered a positive earnings surprise in each of the trailing four quarters, with an average beat of 6.7%.

BorgWarner’s shares have returned 35.9% in the past year, outperforming 31.1% growth of the industry it belongs to.

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

BorgWarner Inc. Price and EPS Surprise

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

A Likely Positive Surprise?

According to our quantitative model, chances of BorgWarner beating the Zacks Consensus Estimate in the fourth quarter are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which is required to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Earnings ESP for BorgWarner is +0.89%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.03 and $1.02, respectively.

Zacks Rank: BorgWarner carries a Zacks Rank #3. This when combined with a positive ESP makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What’s Driving the Better-Than-Expected Earnings?

BorgWarner expects fourth quarter 2017 net earnings in the range of 99 cents-$1.01 per share. Moreover, it expects organic sales growth of 5-6.5% compared with pro forma net sales of $2.24 billion in the year-ago quarter.

For 2017, the company expects net sales of around $9.67-$9.70 billion against the previous expectation of $9.28-$9.38 billion, which translates into organic growth rate of 9-9.5%. The company expects positive impact of foreign currencies as a result of appreciation of euro of $37 million.

Further, BorgWarner expects net earnings in the range of $3.65-$3.70 per share against the previous expectation of $3.50-$3.60 per share in 2017.

A healthy balance sheet and ample cash flow will help BorgWarner in returning capital to its shareholders. These efforts are likely to positively impact its earnings per share. Also, the company is poised to benefit from its expansion strategy.

Stocks to Consider

Here are a few stocks from the same space that posses the right combination of elements to beat on earnings this time around.

Cummins Inc. (CMI - Free Report) has an Earnings ESP of +0.06% and a Zacks Rank #3. The company is expected to report fourth-quarter 2017 results on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tenneco Inc. (TEN - Free Report) has an Earnings ESP of +1.92% and a Zacks Rank of 3. The company’s fourth-quarter 2017 results are slated to be announced on Feb 9.

Allison Transmission Holdings, Inc. (ALSN - Free Report) has an Earnings ESP of +10.40% and a Zacks Rank #3. The company is expected to report fourth-quarter 2017 results on Feb 14.

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