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Auto Stocks' Q3 Earnings to Watch on Oct 25: GM, FCAU, PCAR
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As we enter the busiest week of the Q3 earnings season, the performance of the auto sector continues to disappoint. Nearly 20% of the sector’s companies had posted results as of Oct 21. These companies recorded a year-over-year decline of 8.8% in earnings and 0.6% in revenues, per our Earnings Trend report. In comparison, total S&P 500 companies that have reported so far posted a 3.3% increase in earnings and a 1.8% rise in revenues.
Following a strong Q2, overall projections for the auto sector are looking bleak for Q3. By the end of the earnings season, auto sector earnings and revenues are expected to be down 19.7% and 4.7%, respectively. This will place it among the worst performers in the 16 Zacks sectors. In comparison, total S&P 500 earnings are projected to improve 0.1%, with revenues rising 1.5% year over year.
A large part of the projected earnings decline in the auto sector is expected due to Ford Motor Company (F - Free Report) , which will record a $640 million recall-related expense in the quarter. Moreover, the fall in U.S. auto sales over the last two months is expected to weigh on the results of many automakers. The pressure to maintain attractive incentives and deals may also strain their margins. Further, expenses related to safety recalls as well as the negative impact of foreign currency translation remain headwinds for the sector.
However, there are a few positives as well. Strong sales growth in China and Europe is the primary driving factor for the auto sector in Q3. Moreover, low fuel prices are driving the sales of higher margin vehicle segments, such as SUVs and light trucks.
So, let’s see what awaits these three auto stocks that are slated to release their third-quarter 2016 results on Oct 25.
General Motors Company (GM - Free Report) has an Earnings ESP of -0.69% as the Most Accurate estimate of $1.43 stands below the Zacks Consensus Estimate of $1.44. General Motors surpassed earnings estimates in each of the last four quarters. This resulted in an average positive surprise of 21.86%. The company currently carries a Zacks Rank #3 (Hold). (Read more: Is General Motors Positioned to Beat on Q3 Earnings?)
Fiat Chrysler Automobiles N.V. holds a Zacks Rank #5 (Strong Sell). Earnings ESP for the company is currently 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 34 cents. We note that the company delivered positive earnings surprises in the last two quarters, with an average positive surprise of 52.67%. (Read more: Fiat Chrysler Q3 Earnings: Will the Stock Disappoint?)
PACCAR Inc. (PCAR - Free Report) has an Earnings ESP of -1.01% because the Most Accurate estimate is 98 cents, while the Zacks Consensus Estimate is pegged at 99 cents. PACCAR posted positive earnings surprises in three of the trailing four quarters with an average beat of 1.65%. (Read more: What's in Store for PACCAR this Earnings Season?).
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Auto Stocks' Q3 Earnings to Watch on Oct 25: GM, FCAU, PCAR
As we enter the busiest week of the Q3 earnings season, the performance of the auto sector continues to disappoint. Nearly 20% of the sector’s companies had posted results as of Oct 21. These companies recorded a year-over-year decline of 8.8% in earnings and 0.6% in revenues, per our Earnings Trend report. In comparison, total S&P 500 companies that have reported so far posted a 3.3% increase in earnings and a 1.8% rise in revenues.
Following a strong Q2, overall projections for the auto sector are looking bleak for Q3. By the end of the earnings season, auto sector earnings and revenues are expected to be down 19.7% and 4.7%, respectively. This will place it among the worst performers in the 16 Zacks sectors. In comparison, total S&P 500 earnings are projected to improve 0.1%, with revenues rising 1.5% year over year.
A large part of the projected earnings decline in the auto sector is expected due to Ford Motor Company (F - Free Report) , which will record a $640 million recall-related expense in the quarter. Moreover, the fall in U.S. auto sales over the last two months is expected to weigh on the results of many automakers. The pressure to maintain attractive incentives and deals may also strain their margins. Further, expenses related to safety recalls as well as the negative impact of foreign currency translation remain headwinds for the sector.
However, there are a few positives as well. Strong sales growth in China and Europe is the primary driving factor for the auto sector in Q3. Moreover, low fuel prices are driving the sales of higher margin vehicle segments, such as SUVs and light trucks.
So, let’s see what awaits these three auto stocks that are slated to release their third-quarter 2016 results on Oct 25.
General Motors Company (GM - Free Report) has an Earnings ESP of -0.69% as the Most Accurate estimate of $1.43 stands below the Zacks Consensus Estimate of $1.44. General Motors surpassed earnings estimates in each of the last four quarters. This resulted in an average positive surprise of 21.86%. The company currently carries a Zacks Rank #3 (Hold). (Read more: Is General Motors Positioned to Beat on Q3 Earnings?)
GENERAL MOTORS Price and EPS Surprise
GENERAL MOTORS Price and EPS Surprise | GENERAL MOTORS Quote
Fiat Chrysler Automobiles N.V. holds a Zacks Rank #5 (Strong Sell). Earnings ESP for the company is currently 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 34 cents. We note that the company delivered positive earnings surprises in the last two quarters, with an average positive surprise of 52.67%. (Read more: Fiat Chrysler Q3 Earnings: Will the Stock Disappoint?)
FIAT CHRYSLER Price and EPS Surprise
FIAT CHRYSLER Price and EPS Surprise | FIAT CHRYSLER Quote
PACCAR Inc. (PCAR - Free Report) has an Earnings ESP of -1.01% because the Most Accurate estimate is 98 cents, while the Zacks Consensus Estimate is pegged at 99 cents. PACCAR posted positive earnings surprises in three of the trailing four quarters with an average beat of 1.65%. (Read more: What's in Store for PACCAR this Earnings Season?).
PACCAR INC Price and EPS Surprise
PACCAR INC Price and EPS Surprise | PACCAR INC Quote
PACCAR currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>