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Auto Stock Roundup: US Sales Decline, AutoZone Misses Q2 Earnings, Takata to Cough Up $1B

Zacks Equity Research

The auto sector has seen a couple of disappointing events in the past week, with some of the companies’ stock price movement reflecting the same.

Among the slew of negative developments, light vehicle sales in the U.S. declined on a year-over-year basis in Feb 2017.

AutoZone, Inc. AZO reported second-quarter fiscal 2017 results that missed expectations.

Tesla, Inc.’s TSLA revenues from China increased over three-fold in 2016, while trade unions claim Ford Motor Co. F may cut jobs at its Wales, U.K. plant.

Further, Takata has pleaded guilty to criminal charges leveled against it and has agreed to pay $1 billion in relation to its faulty airbags.

(Read the previous roundup here: Auto Stock Roundup for Feb 23, 2017)

Recap of the Week’s Most Important Stories

1. U.S. light-vehicle sales fell 1.1% year over year to 1.33 million units in Feb 2017. Per Autodata Corp., the demand for cars, sport utility vehicles and pickup trucks inched down to an annualized pace of 17.6 million vehicles in February, from 17.7 million recorded a year ago.

2. AutoZone reported 8.8% year-over-year growth in earnings per share to $8.08 for the second quarter of fiscal 2017 (ended Feb 11, 2017) from $7.43 in the year-ago quarter. However, earnings missed the Zacks Consensus Estimate of $8.20.

Quarterly revenues improved 1.4% year over year to $2.29 billion in the reported quarter. However, the figure lagged the Zacks Consensus Estimate of $2.35 billion. Domestic same-store sales (sales for stores open at least for one year) were flat in the quarter.

In the second quarter of fiscal 2017, AutoZone repurchased 256,000 shares for $198 million, reflecting an average price of $773 per share. The company had shares worth $585 million remaining for repurchase at the end of the quarter. (Read More: AutoZone Earnings, Revenues Miss Estimates in Q2)

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

3. Earlier this week, Takata pleaded guilty to criminal wrong-doing in a Detroit federal court case in relation to the faulty airbags supplied by it. The company has agreed to pay $1 billion in penalties, of which it will pay $25 million as criminal fine, $125 million to injured consumers or those who could be affected and $850 million to auto manufacturers currently facing the recall costs. Automakers are in the process of recalling about 42 million affected vehicles.

In a separate court filing, the auto makers have been accused of using Takata airbags to save costs in spite of being aware of the risks. Honda, Ford, Toyota, Nissan and BMW AG have been particularly charged.

4. Ford plans to cut 1,100 jobs at its Wales, U.K. engine plant, as per trade unions GMB and Unite. However, the company has dismissed the claim, stating that it had no immediate plan for cuts and did not confirm any future plan regarding the same. Last year, Ford had decided to lower investments in Britain due to lack of demand but did not announce any job retrenchment plans.

Conversely, the union company heads stated that 1,100 will be laid off, leaving 600 employees at the site, over the next five years. Both the unions have decided to consult their members and a strike is probable. Ford, alternately, proposed that a joint working party be set up with both unions, to identify the future business needs.

Ford carries a Zacks Rank #3.

5. Tesla’s sales in China for 2016 were significantly higher in comparison to 2015. The company’s revenues grew to $1.07 billion from $318.5 million earned in the previous year. The company had initially faced concerns in the country, including slow deliveries and apprehensions regarding charging.

Tesla also reported 12,243 employees at SolarCity, down 19.8% year over year owing to its target to preserve cash and reduce expenses. Tesla is also shifting to cash sales of its systems over leases to generate cash and provide the cash savings that had been outlined prior to acquisition of SolarCity.

Tesla carries a Zacks Rank #3.

Performance

Half the auto stocks listed below recorded gains in the last week. Tesla lost the maximum among the stocks listed below, while Harley-Davidson, Inc. HOG gained the most.

Over the last six months, Tesla was the biggest gainer, while Tata Motors Limited TTM was the worst performer.

Company

Last 1-Week Period

Last 6 Months

GM

-1.1%

+16.4%

F

+0.2%

+1.5%

TSLA

-8.6%

+26.4%

TM

+0.3%

-6.0%

HMC

-1.8%

+1.1%

HOG

+1.5%

+10.0%

AAP

-1.9%

-1.2%

AZO

+0.5%

-0.1%

 

Auto-Tires-Trucks Sector 5YR % Return

 

Auto-Tires-Trucks Sector 5YR % Return

What’s Next in the Auto Space?

Britain officials are expected to engage in talks with Ford over job cuts. Meanwhile, Cummins is gearing up to pay stock cash dividends next week.

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Ford Motor Company (F): Free Stock Analysis Report
 
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AutoZone, Inc. (AZO): Free Stock Analysis Report
 
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