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Auto Stock Roundup: Toyota Upgrades Safety Features, Thor & Copart Q1 Earnings Beat

Zacks Equity Research
Thor Industries & Copart come up with better-than-expected first-quarter fiscal 2018 results. Toyota Motor North America, Inc. unveils Toyota Safety Sense (TSS) package.

Last week saw increased readiness of top automakers to augment capacity of batteries required for electric vehicles (EVs). Tesla Inc. TSLA, the pioneer in EVs, has completed installing the lithium-ion battery in South Australia. In fact, in order to secure supply of battery metals, German automaker Volkswagen AG VLKAY is in discussion with metal traders and mulling over arranging some long-term solutions.

On the other hand, in order to tackle the grave concern of safety related recalls, Japanese auto major Toyota Motor Corporation’s TM holding company Toyota Motor North America, Inc. is coming up with Toyota Safety Sense (TSS) package. This package, embedded with active safety features will be used in certain vehicles from mid-2018.

Last week also saw a couple of companies coming up with earnings results. Both Copart, Inc. CPRT and Thor Industries, Inc. THO reported first-quarter fiscal 2018 (ended Oct 31, 2017) results. Both the companies beat on earnings and revenues.

(Read the previous roundup here: Auto Stock Roundup for Nov 22, 2017)

Recap of the Week’s Most Important Stories

1.    Per Reuters, Tesla has completed installing the world's largest lithium-ion battery in South Australia. The construction was completed within 55 days from Sep 29, when the grid connection deal was signed.

In July, the company won a bid to construct 129 megawatt hour battery for Australia’s most wind-energy dependent state i.e. South Australia. The company’s CEO Elon Musk had pledged to install the battery within 100 days of signing the grid connection agreement. Otherwise the same would be given to the state for free.

At the time of signing the deal, Tesla had already installed half the battery packs.

The company’s powerpacks have been installed at a wind farm in France's Neoen and are undergoing testing to offer grid security services. Per South Australia Energy Minister, the battery will be operational from Dec 1.

Of the total $390-million plan that the state has sanctioned for diesel-fired generators to deal with frequent power cuts, it is yet to determine the amount to be paid to Tesla for the battery (read more: Tesla Builds Largest Lithium-Ion Battery in Australia).

Currently, Tesla has a Zacks Rank #4 (Sell).

2.    Copart reported adjusted earnings per share of 33 cents in first-quarter fiscal 2018 (ended Oct 31, 2017), beating the Zacks Consensus Estimate of 26 cents. The bottom line improved 17.9% from 28 cents registered in the year-ago quarter.

Net income was $77.5 million, reflecting a plunge of 53.7% or $89.8 million from the first quarter of fiscal 2017.

Copart’s revenues increased 21.1% to $419.2 million from the year-ago quarter and surpassed the Zacks Consensus Estimate of $377.4 million.

Service revenues increased 21.8% to $374.1 million, while revenues from vehicle sales gained 15.8% to $45.1 million.

Gross margin improved 12.4% to $163.3 million in the reported quarter from $145.3 million a year ago. Operating expenses also increased to $295.2 million from $241.2 million registered in the prior-year period.

Operating income increased to $124 million from $104.8 million a year ago (read more: Copart Q1 Earnings & Revenues Beat Estimates, Up Y/Y).

Currently, Copart sports a Zacks Rank #1 (Strong Buy). You can see  the complete list of today’s Zacks #1 Rank stocks here.

3.    Volkswagen is making long-term arrangements to secure supply of battery metals required for electric vehicles, per a Bloomberg report. In fact, the German auto giant has invited metal traders for discussion on this matter.

The carmaker, in an email, has stated that it is in talks with producers of materials for electric cars. The company intends to initiate talks on the commodities’ suitability on its supply chain.

Importantly, till this year, cobalt has been one of the top-performing metals. Moreover, cobalt, which is generally used for hardening steel, is an essential component in rechargeable batteries, as it is a good conductor of electricity. High demand for cobalt has made many users rush to secure supplies. Volkswagen is aiming at securing long-term purchase contract.

Securing long-term purchases will be crucial for Volkswagen because it plans to spend more than 34 billion euros ($40 billion) in the next five years as part of a push toward battery-powered vehicles and autonomous-driving systems (read more: Volkswagen Aims to Secure Supply of Battery Metals for EVs).

Currently, Volkswagen has a Zacks Rank #3 (Hold).

4.    Toyota holding company Toyota Motor North America, Inc. reported that its second-generation Toyota Safety Sense (TSS) package will be used in certain vehicles of the company as standard equipment from mid-2018 onward. TSS package comprises active safety features, available in Toyota models.

The upgraded package will have new technologies and potential to augment safety of passengers, besides enhancing driver situational awareness, decision making and vehicle operation over a varied range of car speeds. The new TSS package will arrest frontal collisions, keep drivers within lanes and increase road safety during night driving, which is beneficial to both passengers and drivers.

Further, this new TSS package reflects Toyota’s strategy to reduce costs of advanced safety technologies in order to make them accessible to larger number of car buyers (read more: Toyota Promotes Safe Driving With New Age TSS Package).

Currently, Toyota has a Zacks Rank #2 (Buy).

5.    Thor Industries reported first-quarter fiscal 2018 (ended Oct 31, 2017) earnings of $2.43 per share, surpassing the Zacks Consensus Estimate of $1.8. Net income soared 63.1% to $128.4 million from $78.7 million in the prior-year quarter.

Revenues increased 30.6% year over year to $2.23 billion and also outpaced the Zacks Consensus Estimate of $1.95 billion.

Gross profit jumped 40.7% to $333.2 million from $236.8 million in first-quarter fiscal 2017. Gross profit margin increased to 14.9% compared with 13.9% in the year-ago quarter, driven by strong production, favorable changes in product mix and selective net price rise.

Sales of Towable RVs increased 33.7% year over year to $1.62 billion. This upside was primarily owing to strong demand for its affordably-priced travel trailers. Pre-tax income increased 68.7% to $158.9 million from $94.2 million in the comparable quarter, last fiscal. This growth in the metric was backed by higher sales and improved gross margin, decreased selling, general and administrative (SG&A) expenses plus lower amortization expenses.

Sales from Motorized RVs improved 22.8% to $566.6 million from $461.5 million in the year-ago quarter. This upside was driven by robust increase in demand for Class A and Class C motorhomes. Pre-tax income from the segment surged 30% to $37.6 million from $28.9 million a year ago (read more: Thor Industries Q1 Earnings & Revenues Top Estimates).

Currently, Thor Industries sports a Zacks Rank #1.


Last week, the steepest increase was registered by Advance Auto Parts, Inc. AAP and the sharpest decline was witnessed by Tesla.

In the last six months, the steepest increase and the sharpest decline were witnessed by General Motors Company GM and Advance Auto Parts, respectively.

Company Last Week Last 6 Months
GM -2.6% 30.7%
F 3.6% 13.4%
TSLA -3.2% -8.2%
TM 0.6% 17.3%
HMC 0.2% 19.5%
HOG 4.9% -7.6%
AAP 12.4% -24.8%
AZO 8.9% 12.4%

What’s Next in the Auto Space?

In the first week of December, automakers are expected to report their U.S. sales data for November.

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