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Auto Stock Roundup: TSLA Might Miss Delivery Target, KMX Q1 Earnings Top

Zacks Equity Research

Tesla, Inc.’s TSLA vehicle delivery in North America so far in second-quarter 2019 is below its expectation, per Electrek. In fact, the auto giant may fall short of its delivery target for the quarter. Notably, in first-quarter 2019, its vehicle production and delivery number also witnessed sequential declines. However, per the company, there is no shortage of orders and the target is likely to be met.

Recall pertaining to the non-compliance of the emission standards again cropped up. German auto giant Daimler AG DDAIF may have to recall 60,000 Mercedes diesel cars in Germany. Regulators alleged that the software fitted in the cars was aimed at distorting emission test results. The affected models include Mercedes-Benz GLK 220 produced between 2012 and 2015.

CarMax Inc. KMX reported first-quarter fiscal 2020 results this week. Its earnings and revenues surpassed the Zacks Consensus Estimate. Moreover, both improved on a year-over-year basis.

Recap of the Week’s Most Important Stories

1.    CarMax posted net earnings per share of $1.59 in first-quarter fiscal 2020 (ended May 31, 2019), up 19.5% from $1.33 in the year-ago period. Moreover, earnings surpassed the Zacks Consensus Estimate of $1.49. The company’s net earnings grew 11.8% year over year to $266.7 million.

Further, net sales and operating revenues in the reported quarter increased 12% year over year to $5.37 billion. The figure beat the Zacks Consensus Estimate of $5.22 billion. Total gross profit rose 12.3% year over year to $742.4 million.

In first-quarter fiscal 2020, CarMax’s used-vehicle sales rose 12.9% from the prior-year period to $4.54 billion as units sold increased 13% to 224,268 vehicles. The average selling price of used vehicles declined 0.1% from the year-ago quarter to $20,050. Comparable store used-vehicle units sold rose 9.5% from the prior-year level. This robust performance reflects improved conversion and solid growth in web traffic.

Wholesale vehicle revenues rose 7.3% from a year ago to $662.4 million in the reported quarter. Units sold increased 6.6% year over year to 120,768 vehicles, courtesy of growth in store base and appraisal buy rate. The average selling price of wholesale vehicles rose 0.2% from the prior-year quarter to $5,213.

Other sales and revenues increased 6.1% year over year. Moreover, the extended protection plan’s (EPP) revenues rose 11.2% from the year-ago level.

CarMax Auto Finance (“CAF”) reported year-over-year growth of 0.3% in income to $116 million in the quarter under review, reflecting collective effects of 7.9% rise in average managed receivables and a slightly lower total interest margin percentage. (Read more: CarMax Earnings Surpass Estimates in Q1, Rise Y/Y)

CarMax currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

2.    Daimler should recall 60,000 Mercedes diesel cars in Germany, per Reuters. Regulators alleged that the software fitted in the cars was aimed at distorting emission test results. The affected models include Mercedes-Benz GLK 220 produced between 2012 and 2015.

Recently, non-compliance of the emission standards resulted in a large number of recalls. Notably, in March 2019, Fiat Chrysler Automobiles N.V. (FCAU) announced a recall of approximately 965,000 gasoline vehicles that don’t comply with the U.S. emission standards. The flawed vehicles are from the United States and Canada, which will require catalytic converter replacements. Also, Jaguar Land Rover recalled 44,000 cars in the U.K. over issues related to carbon dioxide emissions.

The news of this recall by Daimler was first reported by Bild am Sonntag, the German national newspaper. In April, Bild am Sonntag reported that the German auto regulator was investigating the doubtful software used in the Mercedes-Benz GLK 220 CDI vehicles produced between 2012 and 2015. However, Daimler said that it would appeal against the recall decision but it will cooperate with regulators. (Read more: Daimler to Recall Mercedes Diesel Vehicles in Germany)

Daimler currently carries a Zacks Rank #4 (Sell).

3.    General Motors Company GM is set to invest an additional $20 million for upgrading the Arlington Assembly plant in Texas, per Reuters. This announcement comes prior to the launch of full-size sports utility vehicles (SUVs). Notably, this investment will not add to the production capacity of the plant.

Arlington Assembly is a large plant in the country, which employs about 4,500 people. Since 2015, the company has invested $1.4 billion in this plant. Moreover, a couple of years ago, General Motors started construction on a supplier park close to the main assembly plant, which was projected to employ 1,250 people.

This plant upgrade was required as the company is preparing to start producing all-new SUVs. The plant upgrade will include making improvements in the plant’s conveyance system and refurbishing paint robots. (Read more: General Motors to Invest $20M to Upgrade Texas Plant)

General Motors currently carries a Zacks Rank #3.

4.    Tesla delivered 49,000 vehicles in North America so far in second-quarter 2019, per Reuters. According to Electrek, this is below the electric vehicle (EV) giant’s expectation and is likely to affect its goal of creating a record for new vehicle delivery in the quarter.

In first-quarter 2019, Tesla’s vehicle production and delivery numbers witnessed sequential declines of 10.9% and 31%, respectively. In the same quarter, it managed to produce roughly 77,100 vehicles — consisting of 62,950 Model 3, and 14,150 Model S and X. Out of the total delivered figure of 63,000 units, the company’s Model 3 accounted for 50,900 while Model S and X were 12,100. This raised concerns about its ability to make profits and meet the delivery target while encountering issues pertaining to cash flow and manufacturing.

However, Tesla’s chief executive officer, Elon Musk, stated that the company has enough orders to set a record for vehicle deliveries in the second quarter. In a leaked email, he has added that there is no scarcity of orders but right vehicles are not all in right locations yet.

Tesla currently carries a Zacks Rank #5 (Strong Sell).


In the past week, General Motors has gained the most. Tesla stock declined the most.

In the past six months, Tesla has declined the most while AutoZone, Inc. AZO recorded maximum gain.

Company Last Week Last 6 Months
GM 3.7% 12.5%
F -1.3% 26.9%
TSLA -3.2% -34.3%
TM -1.5% 6%
HMC -1.2% -3.4%
HOG 2.2% 5.1%
AAP -2.5% -3.6%
AZO -3.2% 29.5%

What’s Next in the Auto Space?

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

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CarMax, Inc. (KMX) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Daimler AG (DDAIF) : Free Stock Analysis Report
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