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

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BorgWarner (BWA - Free Report) is slated to release third-quarter 2019 results on Oct 31, before the opening bell. The Zacks Consensus Estimate for the quarter to be reported is earnings of 85 cents per share on revenues of $2.38 billion.

The automotive equipment supplier’s earnings in the last reported quarter were in line with the Zacks Consensus Estimate of $1 per share. As far as earnings surprises are concerned, the company surpassed estimates in three of the trailing four quarters, with the average positive surprise being 5.12%.

Investors are expecting BorgWarner to top earnings estimates this season as well. However, our model does not indicate an earnings beat for the company for the to-be-reported quarter.

Which Way are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for third-quarter earnings per share has been downwardly revised by 2 cents to 85 cents in the past seven days. The estimated figure indicates a decline from the year-ago reported earnings of $1 per share. The Zacks Consensus Estimate for revenues is pegged at $2,377 million, suggesting a decrease from the prior-year reported figure of $2,479 million.

Factors to Consider

Increasing demand for hybrid and electric propulsion engines is likely to have boosted orders and aided BorgWarner’s third-quarter earnings. The firm is expected to have gained from a diverse product range that caters to hybrid and electric vehicles.

However, decline in light-vehicle production across all major markets served is likely to have impacted BorgWarner’s top line in the to-be-reported quarter. Due to softening demand in China amid trade tensions, the company is increasingly pessimistic about its markets in the country. Weakness in European auto markets is expected to have negatively impacted the company’s third-quarter performance. Divestiture of the thermostat product line and unfavorable foreign currency translations are likely to reflect on the firm’s third-quarter results. In fact, the company envisions third-quarter net earnings in the band of 83-90 cents per share, indicating a decline from $1 in the year-ago period.

Further, supply chain inefficiencies and higher research and development costs are likely to have dented its margins. Notably, the company forecast R&D costs to be higher in the second half of the year, as it continues to invest heavily in electrification-related programs.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for BorgWarner for the quarter to be reported. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -2.00%.This is because the Zacks Consensus Estimate is pegged a penny higher than the Most Accurate Estimate.

Zacks Rank: BorgWarner currently has a Zacks Rank #3.

Stocks to Consider

Here are some companies, which according to our model have the right combination of elements to post an earnings beat in the third quarter.

Booz Allen Hamilton Holding Corporation (BAH - Free Report) is set to report quarterly earnings on Nov 1. The firm carries a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +3.69%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brighthouse Financial, Inc. (BHF - Free Report) is set to report quarterly earnings on Nov 4. The firm carries a Zacks Rank #3 and an Earnings ESP of +11.14%.

Acadia Healthcare Company, Inc. (ACHC - Free Report) is set to report quarterly earnings on Nov 5. The stock has a Zacks Rank #3 and an Earnings ESP of +1.34%.

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