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Auto Stock Roundup: TSLA Hits Record High, GM and F Bump Up Investments & More

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Fiat Chrysler Automobiles FCAU and France’s PSA Groupe signed a binding merger agreement to create the fourth-largest automaker in the world. In this era of sustainable mobility, such mergers are essential for the auto industry that is facing an expensive upheaval, in an attempt to shift away from fossil fuels toward battery EVs and autonomous technology.

Tesla TSLA soared to a record high during yesterday’s trading session. Impressive sales of existing products, aggressive expansion efforts that will allow the company to manufacture and sell autos and batteries in Europe and Asia, as well as exciting future products have made Tesla one of the hottest stocks of 2019, with share price nearly doubling since the beginning of June. The company is finally meeting management’s highly ambitious goals. Considering the tailwinds, the stock still has plenty of upside potential left. It appears that other aspirants in the electric auto market are going to have to keep chasing Tesla for the foreseeable future. Tesla currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recap of the Week’s Most Important Stories

1. Tesla hit an all time high of $395.22 yesterday, after closing a tad lower at $393.15. Lately, the company has been witnessing remarkable rally and getting closer to reach Musk’s goal of $420 per share soon. Tesla has gained almost 60% over the past three months. So, what’s behind this bullishness? Well, the company’s surprise profit in the last reported quarter has really boosted investors’ optimism surrounding the stock. Rising deliveries of Model 3 have been driving the stock. Also, progress at the company’s Shanghai Gigafactory, wherein production is ramping up, is a positive catalyst for Tesla. A phase one trade deal between the United States and China, announced last week, would also boost its operations in the country. CEO Elon Musk believes that the Chinese market will be a key to Tesla’s future. Musk also recently revealed plans for a fourth Gigafactory in Berlin, which will help Tesla avoid any export complications moving its cars to Europe. Plus, the company recently unveiled two new vehicle models: the crossover SUV Model Y and Cybertruck.

2. Fiat Chrysler and France’s PSA Groupe signed a binding agreement for their merger in a 50-50 share swap.The tie-up between Fiat-Chrysler and PSA will lead to the creation of the 4th largest global automotive OEM in terms of volume and 3rd largest by revenues, with combined sales of nearly €170 billion.The combined entity will create an industry behemoth with 8.7-million annual vehicle sales. It is also expected to generate recurring operating profit of more than €11 billion and an operating profit margin of 6.6%.

3. General Motors GM announced plans to produce next-gen Chevrolet Colorado and GMC Canyon mid-size pickups, with an investment of $1.5 billion. With this investment, the company looks forward to invest in growth areas and strengthen its U.S. manufacturing base. This investment is part of General Motors’ pledge to invest $7.7 billion in U.S. manufacturing operations, under a four-year contract approved by UAW members in October 2019.The U.S. auto giant plans to invest $1 billion for upgrades in its Wentzville, MO-based truck plant, which operates on three round-the-clock shifts. The remaining $500 million will be used to rebuild its suppliers’ factories. (Read more: General Motors to Retain 4,000 Jobs With $1.5B Investment)

4. Ford F announced plans to make an investment of more than $1.45 billion across two manufacturing facilities in the Detroit area to make electric, autonomous and sports utility vehicles. With this investment, the automaker expects to add 3,000 jobs.The company looks forward to invest $750 million in its Wayne, MI-based facility in order to manufacture Bronco and Ranger sports utility vehicles, and pick-up trucks. The remaining $700 million will be used to produce electric and hybrid versions of the F-150 truck at Ford’s Dearborn plant. (Read more: Ford to Add 3,000 Jobs With $1.45B Investment in Detroit Area)

The #2 U.S. carmaker announced a safety recall of more than 500,000 Ford Super Duty SuperCrew vehicles developed between 2017 and 2019 over post-crash interior firerisk. This action will affect 490,574 vehicles in the United States and federal territories, 56,112 in Canada, and 852 in Mexico. (Read more: Ford Recalls More Than 500,000 Vehicles Over Post-Crash Risk)

5. Navistar International Corporation’s NAV adjusted earnings per share in fourth-quarter fiscal 2019 came in at $1.14, which surpassed the Zacks Consensus Estimate of 89 cents. Solid contribution from the Parts segment, aided by improving North American operations, resulted in this outperformance. However, the reported EPSwas lower than $1.89 reported a year ago.The company generated $2,780 million in revenues, which beat the Zacks Consensus Estimate of $2,775 million but declined 16% year over year. For fiscal 2020, the company expects revenues in the band of $9.25-$9.75 billion, down from earlier expectation of $11.25-$11.75 billion. Also, adjusted EBITDA is projected in the range of $700-750 million, showing a downtrend from the prior guidance of $875-$925 million. (Read more: Navistar's (NAV) Q4 Earnings Surpass Estimates, Down Y/Y)

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 have moved up apart from AutoZone AZO, with Tesla being the maximum gainer. Even over the past six months, Tesla has registered the maximum rally of a whopping 79.2%, while Ford has been the worst performer.

Company

Last Week

Last 6 Months

GM

5.9%

1.1%

F

4.8%

-5%

TSLA

11.5%

79.2%

TM

0.6%

13.2%

HMC

0.8%

12%

HOG

0.7%

5%

AAP

1.4%

3.1%

AZO

-1.3%

8.9%

 

What’s Next in the Auto Space?

Investors are keenly awaiting third-quarter 2019 earnings of the specialty retailer of used and new vehicles, CarMax Inc. KMX. Watch out for the usual news releases over the next week.

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CarMax, Inc. (KMX) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Ford Motor Company (F) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
AutoZone, Inc. (AZO) : Free Stock Analysis Report
 
Navistar International Corporation (NAV) : Free Stock Analysis Report
 
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