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Auto Stock Roundup: HOG & PCAR Q3 Earnings Beat, TSLA's Gigafactory Progress

Zacks Equity Research

The United Auto Workers’ (“UAW”) nationwide strike against General Motors GM, which has stretched for 37 days so far, is likely to end soon as UAW members are currently voting on a tentative labor deal between the negotiating parties. Notably, the strike was called after the company’s four-year contract with workers expired on Sep 15, without any agreement on replacement. Notably, this marks the first major work stoppage at General Motors in the last 12 years and the longest national strike in the United States since 1970.

The labor deal to end the stoppage still needs to be ratified and requires an approval from the local union leaders and the workers carrying picket signs. Reportedly, per the tentative deal, the union members with General Motors are likely to receive 3-4% raises or lump-sum bonuses each year. The contract requires the U.S. top carmaker to inject around $9 billion in its manufacturing operations, including investment in an all-electric pickup. The deal will ensure permanent jobs for temporary workers and the elimination of a $12,000 cap on profit sharing and $11,000 ratification bonuses.

Meanwhile, American motorcycle maker Harley-Davidson Inc. HOG and truck maker PACCAR Inc. PCAR, among a few others, recently released third-quarter results.

(Read the Last Auto Stock Roundup here).

Recap of the Week’s Most Important Stories

1.  Harley-Davidson delivered earnings per share of 70 cents in third-quarter 2019, which surpassed the Zacks Consensus Estimate of 67 cents. In the prior-year quarter, the figure had amounted to 78 cents per share. This outperformance resulted from higher-than-expected sales in the firm’s motorcycle and related products segment. Total revenues declined 4.9% year over year to $1,069 million in the reported quarter. However, revenues beat the Zacks Consensus Estimate of $1,037 million. The company reported consolidated revenues (including motorcycle sales and financial services revenues) of $1.27 billion, which declined from the prior-year quarter’s $1.32 billion. For 2019, Harley-Davidson has reiterated its full-year motorcycle shipment projection at the range of 212,000-217,000 motorcycles. For fourth-quarter 2019, it expects motorcycle shipments of 38,500-43,500. (Read more Harley-Davidson's Q3 Earnings Beat Estimates, Down Y/Y)

2.   PACCAR reported earnings of $1.75 per share in third-quarter 2019, beating the Zacks Consensus Estimate of $1.62. In third-quarter 2018, the company’s earnings per share were $1.55. This year-over-year improvement can be attributed to record truck delivery and aftermarket parts sales. Revenues from trucks, parts and others came in at $6,004 million, which beat the Zacks Consensus Estimate of $5,864 million. Moreover, the top line grew from the prior-year figure of $5,417 million. Consolidated revenues (including trucks and financial services) totaled $6.37 billion in the quarter compared with $5.76 billion in the year-ago period. Retail unit sales for Class 8 trucks in the United States and Canada are anticipated within 310,000-320,000 for 2019 and 230,000-260,000 for 2020. (Read more PACCAR Q3 Earnings & Revenues Top Estimates, Rise Y/Y)

3.   Genuine Parts Company GPC reported adjusted earnings of $1.50 per share in third-quarter 2019, surpassing the Zacks Consensus Estimate of $1.47. Notably, strategic buyouts of PartsPoint, Inenco and Alliance Automotive Group drove the results. The bottom line also improved from the year-ago profit of $1.48 per share. Genuine Parts reported net sales of $5,015 million, marginally missing the Zacks Consensus Estimate of $5,026 million. The top line, however, increased 6.2% year over year. Considering the impact of the sale of the Electrical Specialties Group of Motion Industries, the company downwardly revised its guidance. It now expects sales to increase 3.5% versus the prior view of 4.5-5.5% growth. The company currently expects adjusted earnings per share within $5.60-$5.68 compared with the previous forecast of $5.65-$5.75. (Read more Genuine Parts Beats Q3 Earnings Estimates, Tweaks View)

4.  Gentex Corporation GNTX reported third-quarter 2019 earnings per share of 44 cents, which beat the Zacks Consensus Estimate of 42 cents on higher revenues and increasing auto-dimming mirror shipments. In the year-ago quarter, the company’s earnings were 42 cents. Its net income rose to $111.9 million from $111.3 million reported in third-quarter 2018. During the quarter under review, the company delivered net sales of $477.8 million, which nominally beat the Zacks Consensus Estimate of $477 million. Moreover, the top line grew 3.8% from the year-ago figure of $460.3 million. The company downwardly revised its guidance for 2019. It now expects revenues within $1.84-$1.87 billion versus $1.87-$1.90 billion expected earlier. Gross margin is anticipated in the band of 36.6-37.0% for the current year compared with prior expectation of 36.5-37.5%. (Read more Gentex Beats on Q3 Earnings and Sales, Narrows View)

5.   Tesla, Inc. TSLA recently received approval from China’s Ministry of Industry and Information Technology to start production at its $2-billion Gigafactory in Shanghai. The factory would build affordable versions of Tesla Model 3 and its proposed Model Y for Greater China. The company intends to produce at least 1000 Model 3 units per week in the factory as it attempts to strengthen sales in China. Notably, Tesla will be the first fully foreign-owned manufacturing facility in the world’s largest auto market. Currently, Tesla’s vehicle models imported from the United States are subject to tariffs in China. However, the introduction of the factory will help the company avoid higher import tariffs. (Read more Tesla Gets Clearance to Begin Production in China Gigafactory)


Price Performance

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

In the past week, most of the auto stocks have declined, while Harley-Davidson has registered the maximum gain. In the past six months, Toyota Motor TM has gained the most, whereas General Motors has recorded the maximum decline.

 

Company

Last Week

Last 6 Months

GM

-0.9%

-8.6%

F

-0.1%

-5.2%

TSLA

-1.6%

-1.2%

TM

-0.3%

11%

HMC

-0.7%

-3.8%

HOG

9.5%

6%

AAP

2%

-3.4%

AZO

-0.6%

5.5%

What’s Next in the Auto Space?

Industry participants will be waiting for new updates related to the UAW-General Motors strike. If General Motors workers approve the proposed contract, the UAW bargainers are likely to use it as a template for negotiations with Ford and Fiat Chrysler. Meanwhile, investors will keenly await third-quarter 2019 earnings reports of a host of auto bigwigs, including Ford, General Motors and Tesla.

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PACCAR Inc. (PCAR) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
Gentex Corporation (GNTX) : Free Stock Analysis Report
 
Genuine Parts Company (GPC) : Free Stock Analysis Report
 
Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report
 
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