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Auto Stock Roundup: TM & HMC Post Q2 Results, TSLA to Open Gigafactory in Berlin

Zacks Equity Research

In the past week, Japanese auto biggies including Toyota Motor TM and Honda Motor HMC came up with fiscal second-quarter 2020 results. While Toyota lagged earnings estimates, Honda managed to deliver a comprehensive beat. However, both the companies narrowed their sales target amid sluggish global auto demand. Another Japanese carmaker Nissan Motor NSANY released quarterly results a couple of days back and delivered an earnings beat.

Meanwhile, the electric vehicle giant Tesla TSLA announced plans to build its first European Gigafactory in Berlin.Car production in the Berlin Gigafactory is expected to begin in late 2021.

(Read the Last Auto Stock Roundup here).

Recap of the Week’s Most Important Stories

1. Toyota posted earnings of $3.87 per ADR, up from the year-ago figure of $3.59. However, the bottom line missed the Zacks Consensus Estimate of $3.94. Consolidated revenues increased to ¥7.6 trillion ($71 billion) from ¥7.3 trillion ($65.5 billion) recorded in the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $66.9 billion. Notably, the firm announced a $1.8-billion share buyback. In the first six months of fiscal 2020, consolidated vehicle sales increased to 4,638,565 units globally, marking an increase of 219,637 units from the same period of the last year. However, anticipating a slowdown in India, Indonesia and Thailand, the company narrowed the annual vehicle sales target. For fiscal 2020, Toyota expects consolidated vehicle sales to be 8.95 million units, down from the previous forecast of 9 millionunits. (Read more: Toyota Lags Q2 Earnings Estimates, Narrows Sales View)

2. Honda Motor posted earnings of $1.04 per ADR, surpassing the Zacks Consensus Estimate of 91 cents. The firm reported revenues of $34,763 million, surpassing the Zacks Consensus Estimate of $34,286 million and increasing from the prior-year sales of $34,464 million. Bringing in further good news for investors, Honda announced a $915-million buyback. Amid the expectation of stronger yen and contracting sales in India and North America, Honda has narrowed its sales and operating profit view for fiscal 2020 (ending Mar 31, 2020). At the end of fiscal 2020, this Japanese automaker expects revenues to be ¥15 trillion, indicating a 5.3% year-over-year decline. This compares unfavorably with the prior guidance of ¥15.7 trillion. (Read more: Honda Beats on Q2 Earnings & Sales, Announces Buyback)

3. Nissan Motor delivered adjusted earnings per share of 29 cents in second-quarter fiscal 2019, beating the Zacks Consensus Estimate of 12 cents. However, the bottom line declined from the year-ago quarter’s 63 cents. The company’s revenues declined 2.93% year over year to $24.5 billion and missed the Zacks Consensus Estimate of $26.2 billion. Operating income fell year over year to $279.62 million.For 2019, the firm projects consolidated revenues of ¥10.6 billion, suggesting a 8.4% drop from the prior-year figure. Operating income is estimated at ¥150 million, indicating fall of 52.9% from 2018 levels. EPS of ¥28.11 is projected for 2019. (Read more: Nissan Earnings Surpass Estimates in Q2, Decline Y/Y)

4. Advance Auto Parts, Inc. AAP reported adjusted earnings of $2.10 per share in third-quarter 2019 (ended Oct 5, 2019), up 11.1% from the prior-year level. The figure also surpassed the Zacks Consensus Estimate of $2.07. Adjusted operating income increased 5.9% year over year to $205.1 million. Advance Auto Parts generated net revenues of $2,312 million, which surpassed the Zacks Consensus Estimate of $2,298 million. Revenues also improved 1.6% from the year-ago quarter. During the quarter under review, comparable store sales increased 1.2% year over year.For the full year, the firm anticipates consolidated revenues in the range of $9,650-$9,750 million. Further, adjusted operating income margin projection is maintained at the band of 8-8.2% and capital expenditure is estimated within $250-$300 million. (Read more: Advance Auto Parts Q3 Earnings Beat Estimates, Rise Y/Y)

5. In less than three weeks of commencement of trial production at the Shanghai Gigafactory, Tesla announced the location of its second factory outside the United States.The company will build its first European factory at Berlin. While the United Kingdom was Tesla’s original choice for the factory, uncertainty over the nation's exit from the European Union made matters risky. Germany seems to be a logical choice for Tesla’s European Gigafactory as the country is the biggest market for EVs, with huge potential. Further, constructing a factory in Europe would help Tesla avoid the complexities of exporting its cars to the nation, and avoid uncertainty around trade and tariffs.(Read More: Tesla to Open First European Gigafactory in Berlin)

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, all stocks scaled up, except Advance Auto Parts. In the past six months, Ford F has declined the most, while Tesla has registered the maximum gain.

 

Company

Last Week

Last 6 Months

GM

6.6%

-0.4%

F

0.8%

-14.9%

TSLA

49.6%

49.3%

TM

9.7%

19.9%

HMC

12.9%

13.4%

HOG

6.9%

8.2%

AAP

-0.8%

1.8%

AZO

10.8%

20.1%

 

What’s Next in the Auto Space?

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

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