Auto Roundup: LAD Expands UK Presence, WPRT Incurs Q4 Loss & More
Last week, one of the top US auto retailers, Lithia Motors LAD, strengthened its foothold in the U.K. with the acquisition of Jardine Motors, which is expected to add $2 billion to the company’s annualized revenues. Auto equipment provider Westport Fuel Systems WPRT delivered dismal fourth-quarter 2022 results. It incurred a wider-than-anticipated loss. The top and bottom lines declined from the year-ago period. US legacy automaker General Motors GM confirmed that the production halt at its Silao plant in Mexico would resume on Mar 21. It also reached an agreement with a major union at its factory in Silao. Meanwhile, close peer Ford F announced the recall of 1.5 million cars to fix brake and windshield wiper issues. Japan’s auto giant Honda HMC also made headlines with the recall of nearly half a million vehicles in the United States and Canada over a front seat belt latching issue.
GM and LAD currently carry a Zacks Rank #3 (Hold). While F and HMC are #4 Ranked (Sell) stocks, WPRT carries a Zacks Rank #5 (Strong Sell) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Last Week’s Top Stories
Lithia announced the acquisition of Jardine Motors Group, which is one of the leading auto retailers with a presence in more than 50 premium retail locations in the U.K. The Group has a strong record and market position in the country, representing the premium car brands Audi, Mini, BMW, Aston Martin, McLaren, Aston Martin, Mercedes-Benz, Porsche, Jaguar Land Rover and Ferrari. The acquisition is likely to add $2 billion in annualized revenues for Lithia.
With the buyout, Lithia has acquired more than $2.1 billion in annualized revenues so far this year, setting the stage for another solid year of acquisition growth. Last year, the company acquired more than $3.5 billion in annualized revenues.Despite current macroeconomic headwinds and industry challenges, the company believes that it is well-placed to generate $50 billion in revenues and $55-$60 in earnings per share by 2025 through strategic acquisitions.
Westport incurred a loss of 10 cents per share in fourth-quarter 2022, wider than the Zacks Consensus Estimate of a loss of 6 cents. The company had posted an EPS of 4 cents for the year-ago period. Westport registered consolidated revenues of $78 million in the quarter, topping the Zacks Consensus Estimate of $75 million. The top line, however, declined from the $82.7 million generated in the corresponding quarter of 2021. The company generated an adjusted EBITDA of a negative $12.9 million in the quarter under review.
Westport had cash and cash equivalents of $86.18 million as of Dec 31, 2022, down from $124.9 million at the end of 2021. Long-term debt decreased to $32.2 million at the end of fourth-quarter 2022 from $45.1 million on Dec 31, 2021. Net cash used in operating activities was $31.5 million in 2022.
General Motors confirmed the halt in the production of light-duty trucks in its Silao-based plant would extend till Mar 20. Dan Flores, GM’s spokesperson, said, "GM is actively working with our suppliers to resolve this supply chain challenge in order to meet high customer demand for our vehicles." The production at the Silao-based plant is expected to resume tomorrow. The operations have been down since Mar 4 due to a scarcity of parts.The Silao-based plant builds GMC Sierra and the light-duty Chevrolet Silverado. There is no hint of a halt in production at GM’s other truck plants based in Flint and Oshawa, Ontario. However, to proactively control inventory levels, GM announced to keep Fort Wayne, IN, truck plant shut for two weeks, starting Mar 27.
In another development, General Motors reached an agreement with the local union to raise salaries in the Silao plant. The 10% hike is one of the sector’s biggest recent raises in Mexico. Last year, the salary hike was 8.5%. Speaking about the current raise, the Silao union, SINTTIA, said, “This overcomes the two-digit barrier that has not been reached in the automotive industry in many years.” The raise at the Silao plant is set to go into effect on Mar 25 for a year and is believed to restore the purchasing power of workers in the face of high headline inflation.
Ford (F) is recalling 1.3 million vehicles across the United States to address leaky brake hoses that increase the possibility of a crash. Ford Fusions and Lincoln MKZs sedans with the model year 2013-2018 are part of the recall. NHTSA said that the fluid carrying rubber hoses could rupture prematurely, causing the fluid to leak. In the given case, the driver may experience an increase in pedal travel and a reduction in the rate of deceleration, increasing the possibility of a crash. The auto manufacturer plans to notify the concerned owners via mail between Apr 17 and Apr 28.
The automaker is also recalling nearly 220,000 F-150 pickups to fix defective windshield wiper arms. A faulty spline can result in the failure of the windshield wiper motors, because of which the wipers can stop working during adverse weather conditions or even break off. Before failing, one or both wipers start moving slowly or erratically. Ford has observed 576 cases of inoperative or detached windshield wiper arms and nine complaints to NHTSA but no crashes have resulted in any injuries. The company plans to inform the concerned truck owners via mail starting Mar 31.
Honda announced recalling some of its latest light vehicles and SUV models in the United States and Canada due to manufacturing issues that can prevent front seat belts from latching properly. Overall, 448,613 vehicles are covered by the recall in the United States. The models that are part of the recall are the 2017-2020 CR-V, 2018-2020 Odyssey, 2018-2019 Accord and Accord Hybrids, 2019-2020 Acura RDXs, and the 2019 Insight.
In a report posted by U.S. safety regulators, Honda said, "With continuous use, the buckle channel surface coating may deteriorate over time and the release button may shrink against the channel at low temperatures, increasing friction. This can result in issues with the seat belt buckle latching.” If the buckle of the seat belt does not latch properly, the risk of injury in the case of a crash increases. So far, Honda has not received any reports of injury or death related to the issue. Honda dealers are likely to replace the front seat belt buckle release buttons or the buckle assemblies. The notification will be sent via letters to the owners starting Apr 17.
The following table shows the price movement of some major auto players over the last week and the past six months.
Image Source: Zacks Investment Research
What’s Next in the Auto Space?
Industry watchers will keep a tab on February 2023 passenger and commercial vehicle registrations to be released by the European Automobile Manufacturers Association soon.
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Ford Motor Company (F) : Free Stock Analysis Report
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