A host of companies belonging to the Auto-Tires-Trucks sector are slated to release their quarterly numbers this week. So far, two S&P 500 sector components have reported earnings figures. PACCAR Inc. PCAR and Cummins Inc. CMI beat earnings and revenue expectations for the second quarter.
In the last reported quarter, the auto sector’s earnings plummeted 77.5% year over year on a 11.6% revenue decline. In the second quarter, overall earnings and revenues for the auto sector are projected to be down a whopping 228.1% and 47.7% year over year, per the latest Earnings Preview. The auto sector’s earnings are, in fact, likely to decline the most among all the 16 sectors.
Let’s take a look at the factors that are likely to have impacted auto stocks during the to-be-reported quarter.
Automakers around the globe are expected to have struggled with declining car sales amid the economic-slowdown concerns due to the coronavirus pandemic. Notably, vehicle sales from each of the Detroit 3 carmakers — Ford, General Motors and Fiat Chrysler — dropped year over year during the June-end quarter.
The pandemic has crippled the auto industry, thanks to the closure of factories, lower footfall at dealerships and disruptions in the global supply chains. Amid the pandemic-related uncertainties, several auto firms have withdrawn their annual guidance and are resorting to cost-containment measures in a bid to preserve the financial flexibility. Dividend cuts, buyback suspensions, employee layoffs, pay cuts and hiring freezes have become commonplace during this crisis.
The virus outbreak has given rise to unprecedented challenges for the auto sector, having created a demand shock as consumers’ confidence has dropped significantly. The coronavirus crisis is expected to have eroded automakers’ earnings and sales in the quarter under review.
Key Releases on Jul 30
Let’s take a glance at how these four auto players are placed ahead of their quarterly results, slated for a Jul 30 release.
General Motors GM: In the last reported quarter, General Motors delivered solid results on higher-than-anticipated profit in the North American segment. The company beat estimates in each of the trailing four quarters, the average surprise being 112.59%.
General Motors Company Price and EPS Surprise
General Motors Company price-eps-surprise | General Motors Company Quote
Our proven model suggests that the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Things are looking up for General Motors as it currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of +18.72%. The Zacks Consensus Estimate for the quarter’s loss is pegged at $1.72 per share on revenues of $20.47 billion.
General Motors’ SUVs and crossover vehicles, which account for majority of its sales volumes, are becoming popular on lower interest rates and gas prices. Further, the firm introduced vehicle-financing programs to spur demand during such uncertain times in the second quarter. Its cost-cutting efforts are anticipated to have aided the quarterly margins to some extent.
However, the company might have witnessed a decline in sales volumes amid industry headwinds. General Motors’ customer deliveries in the United States in the quarter to be reported plunged 34% from the prior-year period to 492,489 deliveries, as the coronavirus outbreak marred demand for vehicles.
Genuine Parts Company GPC: Genuine Parts put up a disappointing show in the last reported quarter due to dismal contribution across all segments. Over the preceding four quarters, Genuine Parts beat estimates on two occasions for as many misses, the average negative surprise being 4.69%.
Genuine Parts Company Price and EPS Surprise
Genuine Parts Company price-eps-surprise | Genuine Parts Company Quote
Genuine Parts has an Earnings ESP of +14.52% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.03 a share on revenues of $4.45 billion.
Genuine Parts’ April-June quarter results will likely reflect the positive impact of the company’s acquisitions to improve product offerings and expand its geographical footprint. The acquisitions of PartsPoint and Inenco are likely to have contributed to the company’s operating margin, and consequently, the bottom line. Nevertheless, heightening coronavirus fears are likely to have thwarted vehicle demand, in turn dampening demand for replacement parts and materials, and business products that are required to repair and maintain vehicles. (Genuine Parts to Report Q2 Earnings: What's in Store?)
LKQ Corporation LKQ: This aftermarket auto parts distributor reported stellar results in the last reported quarter on higher year-over-year revenues and EBITDA from the North American segment. LKQ beat estimates in each of the trailing four quarters, the average surprise being 7.80%.
LKQ Corporation Price and EPS Surprise
LKQ Corporation price-eps-surprise | LKQ Corporation Quote
LKQ currently carries a Zacks Rank #3 and has an Earnings ESP of -18.37%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 12 cents per share on revenues of $2.32 billion.
LKQ is expected to have registered a decline in sales volumes amid industry headwinds during the second quarter. The company withdrew the current-year guidance and suspended its share-repurchase program in response to disruptions to its supply chain due to the coronavirus mayhem.
Notably, the Zacks Consensus Estimate for its Automotive Parts and Services’ net sales is pegged at $1,867 million, calling for a plunge of 39.5% year on year. However, LKQ's cost-cutting efforts are anticipated to have aided its margins to some extent during the April-June period. While rising elevated SG&A costs, and higher restructuring and acquisition-related expenses might have hurt the company’s quarterly performance, solid cost-containment efforts are anticipated to have offered some respite.
CNH Industrial N.V. CNHI: CNH Industrial posted weaker-than-expected results in the last reported quarter, primarily on lower revenues in the Agricultural Equipment, Construction Equipment, Commercial and Specialty vehicles, and Powertrain segments. The company missed estimates on three occasions and beat in the other — the average negative surprise being 44.7%.
CNH Industrial N.V. Price and EPS Surprise
CNH Industrial N.V. price-eps-surprise | CNH Industrial N.V. Quote
CNH Industrial currently carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of -18.37%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 12 cents per share on revenues of $2.32 billion.
CNH Industrial’s second-quarter results are expected to reflect year-over-year revenue declines across all its industrial activities. The consensus mark for revenues from Agricultural Equipment and Commercial and Specialty vehicles is pegged at $2,177 million and $907 million, calling for a year-over-year decrease of 29.7% and 66.4%, respectively. Notably, the Zacks Consensus Estimate for sales from the Construction Equipment and Powertrain segment is pegged at $311 million and $850 million, suggesting a year-over-year fall of 58.9% and 25%, respectively.
Oshkosh Corporation OSK: This manufacturer and seller of specialty vehicles came up with impressive results in the last reported quarter on robust Defense segment revenues. Oshkosh beat estimates on three occasions and missed in the other — the average surprise being 7.26%.
Oshkosh Corporation Price and EPS Surprise
Oshkosh Corporation price-eps-surprise | Oshkosh Corporation Quote
Oshkosh currently carries a Zacks Rank #3 and has an Earnings ESP of +28.29%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 46 cents per share on revenues of $1.54 billion.
Solid backlogs across the firm’s Defense, and Fire & Emergency segments are expected to have boosted earnings in third-quarter fiscal 2020. The company is also likely to have ramped up production of its new front discharge concrete mixer, S-Series 2.0, which was launched this March. Nonetheless, Oshkosh might have faced a significant rise in raw material costs, specifically in its key components — steel and aluminium in the fiscal third quarter. Moreover, other material costs, freight rates and unstable foreign currency are expected to have flared up expenses during the period in discussion.
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Cummins Inc. (CMI) : Free Stock Analysis Report
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