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F, CMI & MTOR Quarterly Earnings on Feb 3: What to Expect

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The fourth-quarter earnings season for the Auto-Tires-Trucks sector kicked off last week. So far this earnings season, three S&P sector components, namely Tesla TSLA and PACCAR PCAR and General Motors GM, have come up with quarterly numbers. Encouragingly, all the three auto giants managed to surpass earnings and revenue estimates.

PACCAR reported earnings of $1.47 per share for fourth-quarter 2021, topping the Zacks Consensus Estimate of $1.31 and rising from the year-ago figure of $1.17. Tesla reported adjusted earnings of $2.54 a share, which surpassed the Zacks Consensus Estimate of $2.11 and jumped from 80 cents recorded in fourth-quarter 2020. While PCAR and TSLA witnessed year-over-year growth in earnings, GM’s EPS declined from fourth-quarter 2020 levels. General Motors came out with fourth-quarter 2021 earnings of $1.35 per share, beating the Zacks Consensus Estimate of $1.15 but declining from $1.93 recorded in the year-ago period.

Let’s take a look at the factors that are likely to have impacted auto stocks during the to-be-reported quarter.

Although buyers’ appetite for personal vehicles was quite strong in the quarter under discussion, the industry was unable to meet the mounting demand. Vehicle sales of various auto majors were weighed down by manufacturing inefficiencies and a tight inventory owing to chip shortage. While low sales volumes are likely to have a negative impact on fourth-quarter results, rising prices of vehicles (both used and new) are likely to have offset the same to a large extent. Amid supply-demand mismatch and tight inventory levels, prices of new and used cars hit the roof. In the light of chip crunch, automakers have been prioritizing resources toward high-margin and more popular vehicles like electric cars. The rising deliveries of new energy vehicles (including all-electric, hybrids and fuel-cell) are expected to have fueled revenues.

All in all, while soaring commodity costs and limited vehicle supply amid the chip crunch are likely to negatively impact results, the rising average price of vehicles and high deliveries of electric cars would have partly counterbalanced the headwinds.

Per the latest Earnings Trend report dated Jan 26, the auto sector’s earnings for Q4 are expected to grow 6.1% on a year-over-year basis. As for the revenues, they are estimated to edge up 1% year over year.

Key Releases on Feb 3

Cummins CMI: This leading engine manufacturer posted lower-than-expected earnings in the last reported quarter amid weaker-than-anticipated contribution from Components and New Power segments. Over the trailing four quarters, Cummins beat estimates on three occasions and missed on the other, with the average surprise being 8.02%.

Cummins Inc. Price and EPS Surprise

Cummins Inc. Price and EPS Surprise
Cummins Inc. Price and EPS Surprise

Cummins Inc. price-eps-surprise | Cummins Inc. Quote

Our proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Encouragingly, our proven model predicts an earnings beat for Cummins this time around. This is because it has an Earnings ESP of +1.25% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings and revenues is pegged at $3.08 per share and $5.78 billion, respectively. CMI is set to report results before the opening bell.

An impressive product portfolio, strong geographic diversification, and higher demand for Cummins’ products in North America and international markets are likely to have aided revenues during the to-be-reported quarter.

The Zacks Consensus Estimate for Cummins’ Engine segment’s quarterly net sales is pegged at $2,429 million, suggesting an increase from the year-ago quarter’s $2,329 million. For the December-end quarter, the Zacks Consensus Estimate for the Distribution segment’s net sales is $2,015 million, indicating a decline from the last quarter’s $1,996 million. For the quarter under discussion, the Zacks Consensus Estimate for net sales from the PowerSystem segment is $1,118 million, suggesting an uptick from $989 million recorded in fourth-quarter 2020. The Zacks Consensus Estimate of $1,760 million for the Components segment’s quarterly net sales calls for a decrease from the year-ago quarter’s $1,831 million.

While higher year-over-year projected revenues from Engine and Power Systems segments are likely to have buoyed Cummins’ performance, an estimated decline in sales from Distribution and Components segments might dent overall results.

Meritor MTOR: This auto-equipment provider posted an earnings beat in the last reported quarter on higher-than-expected revenues from the Aftermarket & Industrial segment. Meritor topped earnings estimates in the trailing four quarters, with the average being 18.94%.

Meritor, Inc. Price and EPS Surprise

Meritor, Inc. Price and EPS Surprise
Meritor, Inc. Price and EPS Surprise

Meritor, Inc. price-eps-surprise | Meritor, Inc. Quote

Things are not looking up for Meritor this time around, as it carries a Zacks Rank #3 and an Earnings ESP of -4.70%.

The Zacks Consensus Estimate for the company’s first-quarter fiscal 2022 earnings and revenues is pegged at 75 cents per share and $1 billion, respectively. MTOR is set to report results before the opening bell.

The Zacks Consensus Estimate for revenues (for three months ending Dec 31, 2021) from the Commercial Truck & Trailer segment is pegged at $773 million, implying a year-over-year and sequential uptick of 11.8% and 4.4%, respectively. The consensus mark for revenues from the Aftermarket & Industrial segment is $264 million, calling for an increase from $250 million in the last reported quarter and $234 million registered in fiscal first-quarter 2021.

While higher year-over-year projected revenues across both segments augur well, soaring freight and commodity costs are likely to have dented margins for the December-end quarter. Meritor stated in the last earnings call that escalating steel and freight costs would remain headwinds through 2022. A tight labor market, logistical challenges, and high R&D costs related to electrification programs are also likely to have played spoilsports.

Ford F: This U.S. auto giant delivered an earnings beat in the last reported quarter amid higher-than-expected profits, primarily in North America and South America markets. Ford beat earnings estimates in the trailing four quarters, with the average being 335.6%.

Ford Motor Company Price and EPS Surprise

Ford Motor Company Price and EPS Surprise
Ford Motor Company Price and EPS Surprise

Ford Motor Company price-eps-surprise | Ford Motor Company Quote

Our proven model does not conclusively predict an earnings beat for Ford this time around. This is because it has an Earnings ESP of 0.00% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings and revenues is pegged at 43 cents per share and $35.02 billion, respectively. F is set to report results after the closing bell.

Ford’s fourth-quarter 2021 results are set to reflect higher sequential revenues, thanks to increasing vehicle deliveries despite chip crunch woes. Also, the rising average prices of vehicles are likely to have buoyed the firm’s revenues. Nonetheless, high commodity costs and operational expenses may have clipped margins to some extent.

The Zacks Consensus Estimate for wholesale volumes in North America is pegged at 576,000 units, implying an uptick from 546,000 in third-quarter 2021. Consequently, the consensus mark for revenues in North America is $25.7 billion, pointing to an improvement from $24 billion recorded in the third quarter. In China, Ford sold 167,000 units, marking a sequential increase of 12%. The Zacks Consensus Estimate for fourth-quarter wholesale volumes in Europe is 252,000, which indicates sequential growth of 15.6%. The consensus estimate for fourth-quarter wholesale volumes in South America is pegged at 29,560 units, which points to an increase from the prior quarter’s 20,000 vehicles.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Ford Motor Company (F) : Free Stock Analysis Report

Cummins Inc. (CMI) : Free Stock Analysis Report

PACCAR Inc. (PCAR) : Free Stock Analysis Report

General Motors Company (GM) : Free Stock Analysis Report

Meritor, Inc. (MTOR) : Free Stock Analysis Report

Tesla, Inc. (TSLA) : Free Stock Analysis Report

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