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Ride High on 5 Auto Stocks Set to Beat Q4 Earnings

Steel Dynamics (STLD) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

After a record 2016, auto sales in the United States declined in 2017. This is the first time since the financial crisis that auto sales have declined from the previous-year figure. According to Autodata, in 2017, auto sales in the United States were 17.2 million, down from the prior-year figure of 17.85 million. Despite the decline, 2017 overall was a robust year for the auto industry.

Auto Sales: Uncertain Ride

In December, domestic auto companies General Motors Company (GM) and Fiat Chrysler Automobiles N.V. (FCAU) reported year-over-year sales decline, while Ford Motor Company (F) reported an increase in sales.

Major automakers project auto sales in 2018 to remain weak. Dealing with consumers’ changing preference for pickup trucks and SUVs to passenger cars, would be a challenge for automakers. At the same time, higher interest rates, despite robust growth expectation, will continue to pose challenges for automakers in 2018.

However, in the coming days, auto sales will depend not only on different conventional determinants such as the state of the economy and energy price, but also on various unprecedented factors, including the progress made in the electric and autonomous vehicle driving front.

Auto Stocks: Some Silver Lining

There are a few positive signs for the auto stocks that are likely to give a boost to auto demand. Robust economic growth, improving employment conditions, reasonable gasoline prices, sturdy consumer confidence, and rising income and wages. Also, a slew of measures, including proposed tax cuts should provide some extra advantage to profits and sales.

Also, some investors are bidding up the auto stocks under the notion that the high-margin pickup trucks and SUVs will pull automakers through any downturn.

The upcoming earnings announcements are a key events for the sector, with investors looking for earnings and revenue growth. Earnings growth leads to price rise, indicating more gains and assets for the investors.

The Zacks Methodology

Irrespective of the outlook of the auto sector, there are a few auto stocks which are likely to deliver a positive earnings surprise in the fourth quarter.

Figuring out such prospective stocks could be quite tough unless one applies the proper method. The Zacks methodology makes the task simple, by combining a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Earnings ESP.

Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. And research shows that for stocks with this combination of a Zacks Rank and ESP, chances of a positive earnings surprise are as high as 70%.

You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

5 Auto Picks

Here are four auto stocks that have the right combination of elements to deliver an earnings beat when they report their results.

BorgWarner Inc. (BWA) has an Earnings ESP of +0.47% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rankstocks here.

Headquartered in Auburn Hills, MI, BorgWarner is a leading manufacturer of powertrain products for major automakers. The company is expected to report fourth-quarter 2017 results on Feb 8.

Genuine Parts Company (GPC) has an Earnings ESP of +0.69% and a Zacks Rank #3.

Atlanta, GA-based Genuine Parts Company is engaged in the distribution of automotive and industrial replacement parts, office products and electrical/electronic materials. The company is expected to report fourth-quarter and full-year 2017 results on Feb 20.

Harley-Davidson, Inc. (HOG) has an Earnings ESP of +6.01% and a Zacks Rank #3.

Milwaukee, WI-based Harley-Davidson is the world’s leading designer and manufacturer of heavyweight motorcycles and related products and merchandise. The company is expected to report fourth-quarter and full-year 2017 results on Jan 30.

WABCO Holdings Inc. (WBC) has an Earnings ESP of +0.56% and a Zacks Rank #2.

Brussels, Belgium-based WABCO Holdings is a leading supplier of technologies and services that improve the safety, efficiency and connectivity of commercial vehicles. The company is expected to report fourth-quarter and full-year 2017 results on Feb 16.

Visteon Corporation (VC) has an Earnings ESP of +3.81% and a Zacks Rank #3.

Van Buren Township, MI-based Visteon Corporation designs, engineers and manufactures innovative cockpit electronics products and connected car solutions for most of the world’s major vehicle manufacturers.  The company is expected to report fourth-quarter and full-year 2017 results on Feb 22.

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Ford Motor Company (F) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
BorgWarner Inc. (BWA) : Free Stock Analysis Report
Visteon Corporation (VC) : Free Stock Analysis Report
Wabco Holdings Inc. (WBC) : Free Stock Analysis Report
Genuine Parts Company (GPC) : Free Stock Analysis Report
Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report
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