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Automobile ETFs in Focus After Optimistic Q4 Earnings

The Zacks Automotive – Domestic industry has reported fourth-quarter 2023 earnings, with 60% of the five companies that have reported till now (as of Feb 7) surpassing the Zacks Consensus Estimate. This belongs to the top 46% of the Zacks Industry Rank.

The Fed’s dovish stance and estimates of interest rate cuts in 2024 ensure more activities in the economy, which will likely bolster the industry. A moderating inflation level also adds to the industry’s strength. The industry's growing momentum is evident in the recent performance of the Dow Jones Transportation Average, which tracks leading U.S. transportation companies. It has climbed 3.61% month to date, surpassing the S&P 500's 3.08% increase over the same period.

Below, we highlight the Q4 earnings results of a few renowned domestic automobile companies. So far, the performance has been promising, with optimism for the upcoming year, despite lagging the prior-year quarter.

Earnings in Focus

General Motors

On Jan 31, General Motors GM reported fourth-quarter 2023 adjusted earnings of $1.24 per share, which surpassed the Zacks Consensus Estimate of $1.12. However, the bottom line plunged 41.5% from the year-ago quarter level of $2.12. Revenues of $42.98 billion beat the Zacks Consensus Estimate of $40.78 billion but decreased from $43.1 billion recorded in the year-ago period.

GM North America (“GMNA”) generated net revenues of $35.23 billion, down from $35.47 billion recorded in the corresponding period of 2022. However, the figure outpaced our model projection of $33.2 billion on higher-than-expected deliveries. GM International's (“GMI”) net revenues in the reported quarter, amounted to $3.94 billion, down from the year-ago quarter’s $4.32 billion. The metric also missed our estimate of $4.32 billion due to lower-than-expected deliveries.

However, contrary to the performance in the fourth-quarter, the Detroit automaker’s optimistic guidance for 2024 and intentions to enhance shareholder value drove the 9% jump in shares of the company in early market hours. For full-year 2024, GM increased its expectations of adjusted EPS to $8.50-$9.50.

According to GM Chief Executive Mary Barra’s letter to shareholders, GM is poised for a robust 2024, leveraging the lessons and achievements of 2023. Further, a resilient U.S. economy, along with a growing job market and improving auto sales will prove to be tailwinds for the automaker. The optimistic view of the company is reinforced by the 33.76% surge in GM’s share price since late November 2023.

Ford Motor

On Feb 6, Ford F reported adjusted earnings of $0.29 per share for fourth-quarter 2023, which beat the Zacks Consensus Estimate of $0.12 but fell from $0.51 in the year-ago quarter.  The company’s consolidated fourth-quarter revenues came in at $43.3 billion, beating the Zacks Consensus Estimate of $37.96 billion and rising 4% year over year.

The U.S. legacy automaker reports its automotive results under three business segments — Ford Model e, Ford Blue and Ford Pro. Total wholesale volume across all three segments surpassed the respective Zacks Consensus Estimate, with the Ford Blue segment remaining flat year over year. However, Ford Model e and Ford Pro segments increased 14% and 1% year over year, respectively. Revenues from the three business segments also beat the Zacks Consensus Estimate, driven by better-than-expected volume. For full-year 2024, Ford expects adjusted EBIT of $10-$12 billion.

According to Reuters, the automaker raised its dividend for the first quarter while opting to reduce investments in expanding capacity for unprofitable electric vehicles (EVs), which saw the company’s share price surge about 6%.

Ford’s CEO, Jim Farley, remains optimistic and forecasts a robust outlook for 2024. Farley anticipates another year of double-digit hybrid growth in 2024. According to Ford's Chief Operating Officer Kumar Galhotra, in 2024, the company is well-equipped to address quality and cost issues, boosting fundamental strength and potential growth.

The optimistic view of the company is reinforced by the 31.17% surge in F’s share price since late October 2023.

ETFs in Focus

Below, we highlight a few Auto ETFs for investors to monitor.

Fidelity Electric Vehicles and Future Transportation ETF (FDRV) – down about 1.53% for the past two weeks (As of Feb 7)

First Trust S-Network Future Vehicles & Technology ETF (CARZ) – up about 1.29% for the past two weeks (As of Feb 7)

First Trust Nasdaq Transportation ETF (FTXR) – up about 2.10% for the past two weeks (As of Feb 7)

Global X Autonomous & Electric Vehicles ETF (DRIV) – up about 1.08% for the past two weeks (As of Feb 7)

KraneShares Electric Vehicles and Future Mobility Index ETF (KARS) – down about 0.92% for the past two weeks (As of Feb 7)

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

Ford Motor Company (F) : Free Stock Analysis Report

Global X Autonomous & Electric Vehicles ETF (DRIV): ETF Research Reports

General Motors Company (GM) : Free Stock Analysis Report

First Trust S-Network Future Vehicles & Technology ETF (CARZ): ETF Research Reports

First Trust NASDAQ Transportation ETF (FTXR): ETF Research Reports

KraneShares Electric Vehicles and Future Mobility Index ETF (KARS): ETF Research Reports

Fidelity Electric Vehicles and Future Transportation ETF (FDRV): ETF Research Reports

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