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Auto Sales Plunge in Q2: ETFs & Stocks in Focus

Sweta Killa

The U.S. auto industry was the worst hit last quarter by the COVID-19 pandemic, which has led to the closure of factory and dealerships resulting in lower auto demand across the country. Record job losses and mass work-from-home policies also added to the weakness (read: Most-Loved and Hated ETFs of First-Half 2020).

This is especially true as major automakers reported a more than 30% drop in U.S. auto sales in the second quarter, the biggest plunge since the Great Recession and the auto bankruptcies of 2009. Incentives, sweet discounts and online sales did not help either. Of the major six American and Japanese automakers, Fiat Chrysler FCAU stood at the bottom of the table, registering a 38.6% decline in sales last quarter followed by drop of 49.5% for Nissan NSANY, 34% for General Motors GM, 34.6% for Toyota Motor TM, 33.3% for Ford Motor F and 15.5% for Honda Motors HMC.

The auto market is expected to recover gradually in the following quarters given the bright industry fundamentals. Lower interest rates coupled with lucrative discounts from automakers desperate to boost sales volume are expected to propel sales. The Federal Reserve has kept rates near-zero levels through 2022 and has pledged to continue pumping in stimulus until the economy is back on track. This will encourage lending and boost consumer spending. As such, this will push more consumers to avail loans while buying vehicles.

Below we highlight the pure play auto ETF and a few stocks that could be attractive picks heading into the second quarter, where sales are expected to recover:

First Trust NASDAQ Global Auto ETF CARZ

This fund offers a pure-play global exposure to 33 auto stocks by tracking the NASDAQ OMX Global Auto Index. It is highly concentrated on the top firm with double-digit exposure while others make up for no more than 8.5% share. CARZ has a lower level of $17.3 million in AUM and trades in a small average daily trading volume of about 7,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #5 (Strong Sell) with High risk outlook (read: Tesla Tops $1,000: ETFs to Ride High).

Strattec Security Corporation STRT

It designs, develops, manufactures and markets mechanical locks, electro-mechanical locks and related products for automotive manufacturers with operations in the United States, Canada and Mexico. The stock saw solid earnings estimate revision of 27 cents over the past month for fiscal year (ending June 2021) with estimated growth of 477.8%. Strattec Security has a Zacks Rank #1 (Strong Buy) and VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

AutoWeb Inc. AUTO

This company provides consumer leads and associated marketing services primarily to automotive dealers and manufacturers throughout the United States. It witnessed no earnings estimate revision for this year in a month and has expected growth of 31.6%. AutoWeb has a Zacks Rank #3 (Hold) and VGM Score of B.

NIO Inc. NIO

This company designs, jointly manufactures and sells smart and connected premium electric vehicles. The stock witnessed positive earnings estimate revision of a penny for this year over the past 30 days and has expected growth of 42.5%. NIO has a Zacks Rank #3 and VGM Score of B.

Adient PLC ADNT

It is one of the world’s largest automotive seating suppliers. Though the stock has seen negative earnings estimate revision of 6 cents for the fiscal year (ending Sep 2021) over the past 30 days, it has an estimated earnings growth rate of 379.6%. Adient has a Zacks Rank #2 (Buy) and VGM Score of B (read: Dow Jones ETFs to Soar Further After Best Quarter Since 1987?).

BRP Inc. DOOO

This company designs, develops, manufactures and distributes recreational vehicles. The stock witnessed positive earnings estimate revision of 10 cents for the fiscal year (ending January 2021) over the past 30 days. However, its earnings are expected to decline 60.1% annually. BRP has a Zacks Rank #2 and VGM Score of A.

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Ford Motor Company (F) : Free Stock Analysis Report
 
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
Nissan Motor Co. (NSANY) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Strattec Security Corporation (STRT) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
First Trust NASDAQ Global Auto ETF (CARZ): ETF Research Reports
 
Adient PLC (ADNT) : Free Stock Analysis Report
 
Autobytel Inc. (AUTO) : Free Stock Analysis Report
 
BRP Inc. (DOOO) : Free Stock Analysis Report
 
NIO Inc. (NIO) : Free Stock Analysis Report
 
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