U.S. Markets closed

Auto Stock Roundup: TSLA Ties Up With China Lenders for Gigafactory, HMC to Recall

Zacks Equity Research
U.S. Tech Giants Stop Supply to Huawei

Tesla, Inc. TSLA is making a consistent progress in developing its flagship Model 3 sedan. The electric vehicle (EV) pioneer has inked a deal with lenders in China to obtain a 12-month facility of up to 3.5 billion yuan ($521 million) for its Gigafactory in Shanghai. This brings Tesla a step closer to the production of its flagship Model 3 sedan via the benefit of its first overseas facility. Also, the past week saw advancement on the EV front as Harley-Davidson, Inc. HOG is all set to enter the kids’ electric bike market through the acquisition of StaCyc Inc.

In the same period, Navistar International Corporation NAV reported first-quarter fiscal 2019 earnings per share of 11 cents, meeting the Zacks Consensus Estimate. During the quarter under review, the company recorded revenues of $2.43 billion, up 28% year over year and also beat the Zacks Consensus Estimate. The improvement in revenues was driven by a 50% surge in sales volume of Navistar’s Class 6-8 trucks and buses in the United States as well as Canada.

Meanwhile, Japanese auto giant Honda Motor Co., Ltd. HMC has again been embroiled in a recall mess. This time, Honda is likely to recall around 1 million older vehicles in the United States and Canada due to faulty Takata airbag inflators.

Recap of the Week’s Most Important Stories

1.    Harley-Davidson geared up to penetrate the children’s electric bike market with the acquisition of California-based StaCyc Inc. Founded in 2016, the acquired company designs and sells electric-powered two-wheeled bikes for children. The buyout will broaden Harley’s portfolio to meet customers’ need across varied age brackets.

Over the past few years, the U.S.-based motorcycle manufacturer has been struggling to win new purchasers as its core customer base is aging. In many regions, the company is experiencing persistently soft demand in its key market i.e. the United States, which partly affected worldwide retail sales to decline 6.1% year over year to 228,051 units in 2018.

Adding StaCyc’s products to Harley’s portfolio will aid the company to gain fresh riders outside its core clientele. Further, StaCyc’s foothold in the United States will provide Harley with a chance to slightly recover its market share in the country. (Read more: Harley Widens Electric Portfolio With StaCyc Acquisition)

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

2.    Tesla has announced that it will ink a deal with lenders in China to acquire a 12-month facility of up to 3.5 billion yuan ($521 million) for its Gigafactory in Shanghai, per Reuters. Lenders in the pact include China Construction Bank Corp., Agricultural Bank of China Ltd., Industrial and Commercial Bank of China and Shanghai Pudong Development Bank Co. This credit facility will enable the EV maker inch closer to the production of its flagship Model 3 sedan by dint of its first foreign credit facility.

After prolonged negotiations with the China authorities, Tesla got the nod to own the first wholly-owned foreign manufacturing facility in the country and inaugurated the Shanghai factory in January 2019. The Gigafactory will cost approximately $2 billion and is likely to be completed in May 2019.

A wholly-owned manufacturing plant will be hugely beneficial to the company. This will help it lower the impact of the U.S.-China trade spat. Moreover, this will allow the company to compete with a fleet of EV startups. (Read more: Tesla Inks Deal With China Lenders for Gigafactory)

Tesla currently carries a Zacks Rank of 3.

3.    Honda is likely to recall around 1 million older vehicles in the United States and Canada, according to Associated Press. The company is likely to recall many of its popular models for the second time as the Takata airbag inflators, installed at the time of the previous recalls, could turn out to be fatal.

Ailing vehicles include Honda Accord from 2001 through 2007, CR-V from 2002 through 2006, Civic from 2001 through 2005, Element from 2003 through 2010, Odyssey from 2002 to 2004, Pilot from 2003 through 2008 and Ridgeline from 2006 onward. Other damaged vehicles are Acura luxury models including MDX from 2003 through 2006, EL from 2001 to 2005, TL from 2002 and 2003 and CL from 2003.

Per the transport safety agency Transport Canada, affected vehicles include the ones that were previously recalled and others with airbag replacement after collisions. In fact, Takata used ammonium nitrate to create small explosions for inflating the airbags. But the chemical can deteriorate over time due to fluctuating temperatures and high humidity. It can also burn too fast and blow apart a metal container, hurling shrapnel into drivers and passengers. (Read more: Honda to Recall 1M Vehicles With Faulty Takata Airbags)

Honda is currently a Zacks #3 Ranked player.

4.    Navistar released earnings per share of 11 cents in first-quarter fiscal 2019 (ended Jan 31, 2019), in line with the Zacks Consensus Estimate. The company incurred a loss of 74 cents per share in the prior-year quarter.

During the reported quarter, Navistar recorded net income of $11 million against net loss of $73 million in the year-earlier period.

The company generated $2.43 billion in revenues, surpassing the Zacks Consensus Estimate of $2.23 billion. The figure also marks a 28% rise from the first quarter of fiscal 2018. This year-over-year improvement was primarily driven by a 50% expansion in sales volume of Navistar’s Class 6-8 trucks and buses in the United States and Canada.

During the reported quarter, net sales and revenues at Navistar’s Truck segment were $1.8 billion, up 44% from the year-ago quarterly figure. The segment recorded $90 million profit against $7 million loss in the comparable quarter last fiscal year. This upside was owing to stronger volume in the company’s core markets, partly offset by higher material and freight costs and the effect of sales of a majority interest in Navistar Defense.

Net sales and revenues at Navistar’s Parts segment were $548 million, down 4% from the same period last fiscal year. The segment’s profit was $144 million, up 5% on a year-over-year basis. Results were favored by solid margins and lower inter-company access fees, partly countered by lower BDP volume and higher freight-related expenses.

Net sales and revenues at the company’s Global Operations declined slightly to $73 million. Its profit was $6 million versus loss of $7 million recorded in the first-quarter fiscal 2018. Results were backed by higher volume and cost-reduction benefits.

Net sales and revenues at Navistar’s Financial Services segment rose to $74 million. It recorded profit of $31 million, up 55% year over year. The segment’s profit improved, courtesy of higher interest margin from better funding strategies and income from an inter-company loan. However, this rise was mitigated by higher depreciation expenses on operating leases. (Read more: Navistar Q1 Earnings Meet Estimates, Revenues Beat)

Navistar is currently a #3 Ranked player.

5.    Toyota Motor Corporation TM and Japan’s space agency agreed to collaborate on developing a manned lunar rover, driven by fuel cell technologies, per Reuters. Per the Japan Aerospace Exploration Agency (“JAXA”), this partnership and the development of the lunar rover may turn out to be a major contribution to the international space program in the future.

Per JAXA, the aim is to launch the lunar rover into space in 2029. However, the development of the rover is still in the preliminary stage but an illustration shows a six-wheel vehicle that is somewhat similar to an armored personnel carrier.

Per the Japanese auto giant, which intends to unveil zero-emission fuel cell vehicles as an alternative to gasoline automobiles, this project will offer a chance to test its technologies amid the harsh environment of the moon.

For Toyota, which has several accolades to its credit, this space project indeed seems very exciting and challenging. (Read more: Toyota & Japan's Space Agency Collaborate for Moon Rover)

Toyota currently carries a Zacks Rank #3.

Performance

In the past week, Tesla’s shares gained maximum value while the Harley-Davidson stock declined the most.

In the past six months, AutoZone, Inc. AZO has increased the most whereas Harley-Davidson has lost maximum value.

Company Last Week Last 6 Months
GM 0.3% 10.8%
F -0.6% -10.7%
TSLA 4.6% -2%
TM 1.1% -2.6%
HMC -0.9% -5.4%
HOG -4.5% -17.8%
AAP -2.1% -5.4%
AZO 0.6% 25.8%


What’s Next in the Auto Space?

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

Today’s Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
AutoZone, Inc. (AZO) : Free Stock Analysis Report
 
Navistar International Corporation (NAV) : Free Stock Analysis Report
 
Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research