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How Did Mixed Q2 Earnings Fare For Auto ETF?

·5 min read

The automobile sector came up with mixed results this reporting season. All of the S&P automobile companies reported this earnings season. About 87.5% of companies beat on earnings while 62.5% surpassed on revenues. Moreover, earnings rose 37.2% year over year while revenues increased 24.5%, as indicated by the Earnings Trends issued on Aug 10, 2022.

The U.S. automobile sector has been gaining investor attention of late as the gradual resumption of U.S. and global economic activities highlights brighter prospects. Vehicle demand saw a boost, courtesy of the growing inclination toward personal mobility and still-easier credit conditions. Electric vehicles (EVs) are seeing greater popularity with each passing day and are likely to brighten the prospects of automakers.

Let’s delve a little deeper into the earnings.

Earnings in Focus

In late July,Tesla TSLA reported second-quarter 2022 earnings of $2.27 a share, up from the year-ago figure of $1.45 and surpassing the Zacks Consensus Estimate of $1.82. This marked the sixth straight earnings beat for the company. Higher-than-expected revenues from Services and Other segment resulted in this outperformance.

Total revenues came in at $16,934 million, witnessing year-over-year growth of 41.6%. However, the top line lagged the consensus mark of $17,101 million. The EV giant reported an overall gross margin of 25% for the reported quarter. Further, operating margin came in at 14.6%.

Tesla’s production and delivery totaled 258,580 and 254,695 vehicles, reflecting a year-over-year jump of 25% and 27%, respectively. The delivery figure lagged the consensus mark of 303,532 vehicles.

In late July, General Motors Company GM came out with quarterly earnings of $1.14 per share, missing the Zacks Consensus Estimate of $1.39 per share. This compares to earnings of $1.97 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -17.99%. A quarter ago, it was expected that this company would post earnings of $1.56 per share when it actually produced earnings of $2.09, delivering a surprise of 33.97%.

General Motors Company, which belongs to the Zacks Automotive - Domestic industry, posted revenues of $35.76 billion for the quarter ended June 2022, missing the Zacks Consensus Estimate by 1.35%. This compares to year-ago revenues of $34.17 billion.

In late July, Ford Motor Co. F reported adjusted earnings of 68 cents per share in second-quarter 2022, topping the Zacks Consensus Estimate of 43 cents. Higher-than-expected profits in its North America, South America and Europe segments led to this outperformance.  The bottom line jumped significantly from the year-ago quarter’s earnings of 13 cents. The company’s consolidated second-quarter revenues came in at $40.2 billion, surging 50.2% year over year.

In North America, revenues surged 94% year over year to $29.1 billion in the reported quarter and beat the consensus metric of $23.4 billion. In South America, revenues moved up 29% year over year to $0.7 billion in the quarter. However, the figure lagged the consensus mark of $0.94 billion. In Europe, revenues inched up 3% year over year to $5.8 billion in the quarter but lagged the consensus mark of $6.02 billion. In China, revenues plummeted 20% year over year to $0.4 billion in the reported quarter and lagged the consensus mark of $0.49 billion.

Toyota TM posted fiscal first-quarter fiscal 2023 earnings of $4.14 per share, which surpassed the Zacks Consensus Estimate of $3.77 on higher-than-expected revenues. The bottom line, however, declined from the year-ago earnings of $5.87 a share amid chip woes and supply chain disruptions aggravated by the Russia-Ukraine war. Consolidated revenues came in at $65,543 million, beating the consensus mark of $63,653 million but contracting 9.5% year over year.

Automobile ETF in Focus

Given the current scenario, it is prudent to discuss the following ETF that has relatively higher exposure to the major players in the space:

First Trust S-Network Future Vehicles & Technology ETF CARZ

The investment objective of First Trust S-Network Future Vehicles & Technology ETF is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the S-Network Electric & Future Vehicle Ecosystem Index.

First Trust NASDAQ Global Auto ETF comprises 101 holdings. CARZ’s AUM is $56.2 million while its expense ratio, 0.70%. First Trust NASDAQ Global Auto ETF currently carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook. CARZ is up 13% past month (as of Aug 12, 2022) in line with the S&P 500’s returns.

Bottom Line

On the positive side, Q3 estimates revisions trend has been positive for the Auto sector. Hence, investors can rely on the sector ETF on the better potential.



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Ford Motor Company (F) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
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Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
First Trust SNetwork Future Vehicles & Technology ETF (CARZ): ETF Research Reports
 
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