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Auto Stock Roundup: China Woes, Ford Recalls, Daimler to Make Autonomous Vehicle

Zacks Equity Research
Various factors, including economic turmoil and ongoing trade spat with Washington result in declining auto sales in China in August.

Past week witnessed news pertaining to auto sales in China for August. According to China Association of Automobile Manufacturers (“CAAM”), auto sales in China declined 3.8% year over year in August to 2.1 million. In July, sales dropped 4% while it rose 4.8% in June.

Various factors, including economic turmoil and ongoing trade spat with Washington, can be attributed to this decline in sales. In fact, uncertain economic condition in China led shoppers to tighten their purse strings. Additionally, high gasoline prices and weak stock market has decreased demand for popular sports utility vehicles (SUVs), which has been the driving force behind the auto market’s recent growth. The second biggest U.S. automaker, Ford Motor Company F reported a 36% decline in China sales for August. In the second quarter, General Motors Company’s GM China sales growth declined to 0.7% due to the softening of the market.

The week also saw Ford issuing a recall for nearly 2 million F-150 pickup trucks due to a seat belt defect that could result in vehicle fire. Notably, F-150 is the best-selling vehicle in the United States.

(Read the previous roundup here: Auto Stock Roundup for Sep 6, 2018)

Recap of the Week’s Most Important Stories

1.    Navistar International Corporation NAV reported third-quarter fiscal 2018 (ended Jul 31, 2018) adjusted earnings per share of $1.19, beating the Zacks Consensus Estimate of 93 cents. This compares favorably with the prior-year quarter’s earnings of 37 cents per share.

Navistar recorded net income of $170 million compared with $37 million in the prior-year quarter.

The company’s revenues increased 18% year over year to $2.6 billion in the reported quarter. However, revenues missed the Zacks Consensus Estimate of $2.7 billion. This year-over-year improvement was primarily driven by a 26% increase in sales volume of Navistar’s Class 6-8 vehicles in the United States as well as Canada.

During the quarter under review, net sales at Navistar’s Truck segment increased 25% to $1.9 billion. This improvement primarily occurred on the back of higher volume in the company’s core markets, rise in military sales and shift in model mix.

Net sales at Navistar’s Parts segment were $605 million, witnessing gain of $19 million compared with the same period last year. The company’s results were aided by strong growth of the Fleetrite brand, partly offset by lower U.S. volume and Blue Diamond Parts sales.

Net sales at the company’s Global Operations segment were $89 million, up 6% year over year. Results were aided by higher engine volumes.

Net revenues at Navistar’s Financial Services segment were $65 million, up by $3 million. This improvement was primarily driven by higher average portfolio balances in Mexico and the United States. (Read more: Navistar Q3 Earnings Beat Estimates, Revenues Miss)

Navistar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2.    BorgWarner Inc. BWA introduced a dual volute turbocharger, designed for light-duty vehicles with gasoline engines. The new turbocharger offers faster engine response while accelerating from low speed. Further, it allows the complete separation of engine exhaust pulsations, leading to more exhaust energy turbine wheel compared with traditional turbochargers.

The new dual volute turbocharger is an addition to the company’s wide portfolio of engine boosting products, which is expected to enable original equipment manufacturers (OEMs) to achieve their goals in gasoline-powered light-duty vehicle engines.

Per management, BorgWarner’s knowledge to create advanced engine-boosting technologies will enable it to take a system approach in technology development along with catering customers by offering the precise turbocharging solution.

Prior to this turbocharging solution, dual volute turbochargers were only used in commercial vehicles with diesel engines. In 2012, the company began to develop this technology. Now, it has collaborated with an OEM to manufacture the first full-size pickup truck, enabled with this turbocharger. (Read more: BorgWarner Unveils Dual Volute Turbocharger for Light Vehicles)

BorgWarner currently carries a Zacks Rank #3.

3.    Toyota Motor Corporation TM announced that it is going to restart operations at its domestic assembly plants after a close down, owing to last week’s earthquake, per Reuters. Beginning from Tuesday, the company will start partial production at a few plants that are situated near its headquarter in Aichi Prefecture. The remaining hubs will resume production on Thursday.

On Sep 3, Toyota halted production at 16 out of its 18 domestic plants that manufacture the brand’s vehicles. The decision has been taken after reviewing the supply chain impact due to work stoppage at the transmission hub in Hokkaido, operated by Toyota Motor Hokkaido.

The Hokkaido transmission hub supplies to the company’s assembly factories in Japan and overseas. It manufactures transmissions for gasoline vehicles, transaxles for hybrid gasoline cars and other components, which are used in popular models — including Corolla, RAV4 SUV, and Lexus NX and RX SUVs.

Operations at the Hokkaido plant will resume soon, which were halted as a result of the prior week’s 6.7 magnitude earthquake in the country’s northernmost island. (Read more: Toyota to Resume Production at Domestic Assembly Lines)

Toyota currently carries a Zacks Rank #3.

4.    Daimler AG DDAIF is making efforts to develop twin-purpose autonomous electric vehicle (EV) that can toggle between passenger carrier and delivery van.

With its two-for-one autonomous van, this German auto giant intends to outshine its rivals in pioneering the future of mobility. The new vehicle concept is likely to prop up the company’s collection of mobility services — containing both car and van sharing capabilities — by assisting users to find the quickest mode of transportation.

Due to the rapid advancement of autonomous driving technology, carmakers are putting increased emphasis on mobility services. Daimler, the maker of Mercedes-Benz, is no exception. In collaboration with Robert Bosch GmbH, it plans to test an autonomous shuttle service in California, beginning 2019, with the intention to introduce ‘robo taxis’ in 2023.

The concept of the twin-purpose vehicle consists of a chassis, with two modules that can be switched in less than two minutes. The modules include cargo and egg-shaped minibus versions. Per an official release of the company, the idea is to meet the requirements of logistics companies and public-transport operators, which do not have many drivers and intend to use EVs more efficiently. (Read more: Daimler to Introduce Twin-Purpose Autonomous Vehicle)

Daimler currently carries a Zacks Rank # 4 (Sell).

5.    CNH Industrial N.V.’s CNHI brand IVECO BUS has signed a five-year agreement with Belgium’s Brussels public transport operator STIB-MIVB to deliver 141 Urbanway buses. Per the agreement, IVECO BUS will offer a package, including planning, construction, implementation, and supply of spare parts and battery pack maintenance along with traction chain components.

By the end of 2019, these buses will aid STIB-MIVB to increase Brussels bus network’s total capacity by almost one-third. The deal also marks an important part of network development by using environmentally friendly and sustainable vehicles.

Urbanway by IVECO BUS is an 18-meter-long hybrid electric, which is designed to improve travel situation, with a low floor to manage passenger flow. Further, the bus has a combined electric traction system, with a Euro VI engine. The energy storage system boasts the latest technology and offers a cleaner mobility solution. (Read more: CNH Industrial’s IVECO BUS to Supply 141 Urbanways in Belgium)

CNH Industrial currently carries a Zacks Rank # 2 (Buy).

Performance

Last week, Tesla, Inc. witnessed the maximum gains, while the highest decline was witnessed by General Motors.

In the past six months, Advance Auto Parts, Inc. has increased the most. Honda Motor Co., Ltd. has declined the most.

Company Last Week Last 6 Months
GM -3.5% -9.6%
F -1.6% -15.3%
TSLA 3.5% -11%
TM -0.5% -7.8%
HMC -1.8% -18.6%
HOG 0.9% 2.3%
AAP 0.1% 42.7%
AZO -1.1% 17.6%


What’s Next in the Auto Space?

Watch out for the usual news releases over the next week.

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