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BorgWarner (BWA) to Post Q1 Earnings: What's in the Offing?

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BorgWarner (BWA - Free Report) is slated to release first-quarter 2020 results on May 6, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 49 cents per share on revenues of $2.01 billion.

This automotive equipment supplier posted better-than-expected results in the last reported quarter, mainly driven by the robust performance of the Drivetrain and Engine segments. BorgWarner beat estimates in each of the trailing four quarters, the average positive surprise being 5.95%. This is depicted in the graph below:

BorgWarner Inc. Price and Consensus

Which Way are the Estimates Headed?

Hit by the coronavirus crisis, the Zacks Consensus Estimate for BorgWarner’s first-quarter earnings per share has moved 35.5% south to 49 cents in the past month. This also compares unfavorably with the year-ago quarter’s $1 per share. The Zacks Consensus Estimate for revenues also suggests a year-over-year decrease of 21.5%.

Factors to Consider

Borgwarner’s expansion efforts, product launches, strategic collaborations and strong backlog are likely to have aided its first-quarter performance. However, the company’s sales volumes might have declined on industry headwinds. Heightening coronavirus fears, especially in March, are likely to have thwarted vehicle demand, in turn dampening demand for automotive equipment.

Notably, the Zacks Consensus Estimate for the Engine segment’s quarterly EBIT is pinned at $195 million, lower than the prior-year quarter’s $241 million. The consensus estimate for the segment’s quarterly net sales is pegged at $1,411 million, down from the year-ago quarter’s $1,598 million.

The Zacks Consensus Estimate for its Drivetrain segment’s quarterly net sales is pegged at $891 million, calling for a decline from the $982 million reported in the year-ago quarter. The segment’s EBIT estimate suggests a 25.7% year-over-year decrease to $78 million in first-quarter 2020.

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.

What the Zacks Model Says

Our proven 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 chances of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: BorgWarner has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BorgWarner carries a Zacks Rank of 4 (Sell) currently.

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:

Axon Enterprise, Inc (AAXN - Free Report) has an Earnings ESP of +18.31% and carries a Zacks Rank #3 currently. The company is slated to release first-quarter 2020 earnings on May 7.

ACADIA Pharmaceuticals (ACAD - Free Report) is set to report quarterly numbers on May 7. The company has an Earnings ESP of +6.88% and holds a Zacks Rank of 3, at present.

Arbor Realty Trust (ABR - Free Report) is scheduled to announce earnings figures on May 8. The stock has an Earnings ESP of +1.59% and currently carries a Zacks Rank #3.

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