Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering BorgWarner (BWA), which belongs to the Zacks Automotive – Original Equipment industry.
This auto parts supplier has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. The average surprise for the last two quarters was 19.91%.
For the last reported quarter, BorgWarner came out with earnings of $1.19 per share versus the Zacks Consensus Estimate of $0.98 per share, representing a surprise of 21.43%. For the previous quarter, the company was expected to post earnings of $0.87 per share and it actually produced earnings of $1.03 per share, delivering a surprise of 18.39%.
Thanks in part to this history, there has been a favorable change in earnings estimates for BorgWarner lately. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the stock is positive, which is a great indicator of an earnings beat, particularly when combined with its solid Zacks Rank.
Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.
BorgWarner has an Earnings ESP of +0.39% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock’s Zacks Rank #3 (Hold), it shows that another beat is possibly around the corner. The company’s next earnings report is expected to be released on October 31, 2024.
With the Earnings ESP metric, it’s important to note that a negative value reduces its predictive power; however, a negative Earnings ESP does not indicate an earnings miss.
Many companies end up beating the consensus EPS estimate, though this is not the only reason why their shares gain. Additionally, some stocks may remain stable even if they end up missing the consensus estimate.