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What's in Store for BorgWarner (BWA) This Earnings Season?

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BorgWarner (BWA - Free Report) is slated to release fourth-quarter 2019 results on Feb 13, before the opening bell. The Zacks Consensus Estimate for the quarter is earnings of $1.03 per share on revenues of $2.49 billion.

The automotive equipment supplier posted better-than-anticipated results in the last reported quarter, mainly driven by solid revenue growth in the Drivetrain segment.

The company surpassed estimates in each of the preceding four quarters, the average beat being 8.10%. This is depicted in the graph below:

BorgWarner Inc. Price and Consensus

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for fourth-quarter earnings per share moved 5 cents north to $1.03 in the past 30 days. However, the figure indicates a decline from the year-ago reported earnings of $1.21 per share. The Zacks Consensus Estimate for revenues is pegged at $2.49 billion, suggesting a decrease from the prior-year’s $2.57 billion.

What the Zacks Model Says?

Our proven model predicts an earnings beat for BorgWarner this season. 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: BorgWarner has an Earnings ESP of +0.75%. This is because the Most Accurate Estimate of $1.04 comes in a cent higher than the Zacks Consensus Estimate.

Zacks Rank: BorgWarner carries a Zacks Rank of 3, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors to Consider

The company’s expansion efforts, product launches, strategic collaborations and strong backlog are likely to have aided its fourth-quarter performance.

Increasing demand for hybrid and electric propulsion engines is likely to have boosted orders, driving BorgWarner’s quarterly earnings. The company is anticipated to have gained from a diverse product range that caters to hybrid and electric vehicles. Notably, the Zacks Consensus Estimate for the Engine segment’s quarterly EBIT is pinned at $243 million, higher than the prior quarter’s $241 million.

The Zacks Consensus Estimate for its Drivetrain segment’s quarterly net sales is pegged at $1,041 million, up from the previous quarter’s $993 million. The segment’s EBIT estimate suggests a 24% rise sequentially to $124 million in fourth-quarter 2019.

BorgWarner’s strategic divestitures, including the sale of Morse TEC and thermostat business, are likely to have helped the company streamline its portfolio and garner cash proceeds, in order to focus on developing technically-enhanced propulsion systems.

However, decline in light-vehicle production across all major markets served, along with supply-chain inefficiencies and higher research and development costs, are likely to have dented its margins to some extent. Notably, the company forecasts R&D costs to have flared up in the quarter under review, as it continues to invest heavily in electrification-related programs.

Other Stocks to Consider

Here are some other companies, which according to our model also have the right combination of elements to post earnings beats in the fourth quarter.

LKQ Corporation LKQ is scheduled to report fourth-quarter figures on Feb 20. The stock has an Earnings ESP of +1.68% and carries a Zacks Rank #3, currently.

Visteon Corporation VC is set to release quarterly numbers on Feb 20. The company has an Earnings ESP of +2.63% and carries a Zacks Rank of 3, at present.

Agnico Eagle Mines Limited AEM has an Earnings ESP of +0.70% and is a Zacks #3 Ranked player. The company is slated to report quarterly results on Feb 13.

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