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Auto Stock Roundup: GM Beats, F Misses, TSLA & CATL Ink Deal and More

Zacks Equity Research
·6 mins read

A host of auto companies reported Q4 quarterly numbers this week. While General Motors surpassed earnings estimates, its top rival Ford missed the same. Both the U.S. auto giants reported lower year-over-year earnings. Meanwhile, EV pioneer Tesla signed a two-year deal with China’s battery supplier CATL. Tesla seeks to diversify sources of battery supply as it gears for production ramp-up.Tesla currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

January turned out to be a decent month for U.S. auto sales, as year-over-year gains were recorded across the board by firms that unveiled monthly sales reports. Nonetheless, one will not be able to get a clear picture of how U.S. auto sales are progressing, as sector biggies like BMW, Volkswagen and Nissan will henceforth announce quarterly sales like Detroit 3 carmakers.

Healthy demand for crossovers and light trucks aided January U.S. auto sales of various firms. For instance, January U.S. auto sales rose 5.2%, 17.8%, 8%, 5.1% and 22% at Volvo, Mazda, Kia, Hyundai and Mitsubishi, respectively. While U.S. auto sales of Japan’s top carmaker Toyota Motor TM recorded a 6.3% rise, that of its close rival Honda Motor HMC declined 4.1% year over year.

(Read the Last Auto Stock Roundup here).

Recap of the Week’s Most Important Stories

1. General Motors (GM) reported adjusted earnings of 5 cents per share in fourth-quarter 2019 against the Zacks Consensus Estimate of loss of 11 cents. However, the bottom line declined 96.5% from the year-ago figure amid the UAW strike. The U.S. auto biggie reported revenues of $30,826 million, missing the Zacks Consensus Estimate of $35,249 million. Moreover, the top line decreased from the year-ago figure of $38,399 million. The company recorded negative adjusted automotive free cash flow (FCF) of $1.3 billion in fourth-quarter 2019, comparing unfavorably with FCF of $4.2 billion in the prior-year period. Labor strike took a heavy toll on free cash flow during the quarter. The firm forecasts 2020 adjusted EPS between $5.75 and $6.25 per share. (Read more: General Motors Q4 Earnings Top Estimates, Sales Lag)

2. Ford F reported fourth-quarter 2019 adjusted earnings per share of 12 cents, missing the Zacks Consensus Estimate of 17 cents. In the prior-year quarter, adjusted earnings were 30 cents per share. Ford registered overall fourth-quarter 2019 revenues of $39.7 billion, down from the year-ago quarter’s $41.8 billion. In first-quarter 2020, the company anticipates adjusted EBIT to fall more than $1.1 billion from first-quarter 2019 due to higher warranty costs, lower vehicle volumes, unimpressive results from Ford Credit and increased investment in Mobility. For full-year 2020, the carmaker anticipates adjusted free cash flow within $2.4-$3.4 billion and adjusted EBIT between $5.6 billion and $6.6 billion. (Read more: Ford Q4 Earnings & Revenues Miss Estimates, Down Y/Y)

3. Tesla TSLA signed a battery-supply agreement with China’s largest battery producer, Contemporary Amperex Technology Co. Limited (CATL). The company will determine the battery-purchase volume between July 2020 and June 2022, per its requirement. Tesla expects to deliver at least 500,000 vehicles, marking a year-over-year increase of 36% in 2020. Therefore, the company is working toward securing battery-production capacity from several suppliers, since this rise in deliveries will require more batteries. Tesla had also signed an agreement last August with South Korea’s LG Chem Ltd. in order to source batteries for the Gigafactory 3 in China. Tesla will work with both CATL and LG Chem, in addition to its long-time partner Panasonic. (Read more: Tesla Signs Battery-Supply Agreement With China's CATL)

4. Cummins Inc. CMI reported earnings of $2.56 per share in fourth-quarter 2019, surpassing the Zacks Consensus Estimate of $2.42. The bottom line, however, declined from earnings of $3.63 a share recorded in fourth-quarter 2018.Its revenues also declined 8.9% year over year to $5.57 billion in the reported quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $5.33 billion.For 2020, Cummins now projects revenue decline of 8-12%. The bleak guidance is attributed to lower truck production in North America, India, Brazil, China, India and Europe. Decline in demand in off-highway markets — including construction and mining markets — is likely to limit revenues. (Read more: Cummins Q4 Earnings & Sales Top Estimates, Down Y/Y)

5. O’Reilly Automotive Inc. ORLY reported earnings per share of $4.25 in fourth-quarter 2019, lagging the Zacks Consensus Estimate by a penny.Nonetheless, the bottomline was up 14.2% from $3.72 in the prior-year quarter. O’Reilly’s quarterly revenues came in at $2,482.9 million, topping the consensus mark of $2,473 million. Moreover, the top line was higher than the prior-year level of $2,314.9 million. The auto-parts retailer’s comparable store sales growth was 4.4% in the quarter ended Dec 31, 2019 compared with 3.3% rise in the comparable year-ago period. Bringing in pleasant news for shareholders, the auto-parts retailer approved additional buyback worth $1 billion, raising the aggregate authorization to $13.75 billion. For full-year 2020, O’Reilly expects revenues between $10.7 billion and $11 billion. (Read more: O’Reilly Misses Q4 Earnings Estimates, Boosts Buyback)

Price Performance

The following table shows the price movement of some of the major auto players over the past week and six-month period.

While Tesla has gained the most in the past week, Ford has registered the maximum loss.  Even in the past six months, Tesla has been the maximum gainer, while Ford has declined the most.

Company

Last Week

Last 6 Months

GM

5.1%

-11.1%

F

-6%

-12.8%

TSLA

14.6%

214.7%

TM

0.4%

10.5%

HMC

-0.4%

9.7%

HOG

4%

5.9%

AAP

1.3%

-4.9%

AZO

-1.2%

-0.2%

 

What’s Next in the Auto Space?

Investors are keenly awaiting quarterly results of a host of auto companies including BorgWarner, AutoNation and Lithia Motors that are scheduled to release next week.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

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Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Ford Motor Company (F) : Free Stock Analysis Report
 
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
O'Reilly Automotive, Inc. (ORLY) : Free Stock Analysis Report
 
Cummins Inc. (CMI) : Free Stock Analysis Report
 
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