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The auto sector has recorded a weak performance so far in Q3, much in line with expectations. 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 Trends 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 appear 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 two auto stocks that are slated to release their third-quarter 2016 results on Oct 26.
Tesla Motors, Inc. (TSLA - Free Report) has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 64 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Tesla missed earnings estimates in each of the last four quarters. This resulted in an average negative surprise of 103.35%. The company currently carries a Zacks Rank #4 (Sell). (Read more: Will Tesla Continue to Disappoint in Q3 Earnings?)
Lear Corp. (LEA - Free Report) currently has an Earnings ESP of -0.33% as the Most Accurate estimate of $3.01 stands below the Zacks Consensus Estimate of $3.02. The company holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. We note that Lear Corp. delivered positive earnings surprises in the trailing four quarters, with an average positive surprise of 11.82%.
This week, Zacks researchers have named 7 other stocks that look to break out even sooner than today's Bull of the Day. You can see these time-sensitive tickers free, and access additional trades that are not available to the public.Simply click here>>
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Auto Stocks' Oct 26 Earnings Preview: TSLA, LEA
The auto sector has recorded a weak performance so far in Q3, much in line with expectations. 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 Trends 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 appear 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 two auto stocks that are slated to release their third-quarter 2016 results on Oct 26.
Tesla Motors, Inc. (TSLA - Free Report) has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 64 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Tesla missed earnings estimates in each of the last four quarters. This resulted in an average negative surprise of 103.35%. The company currently carries a Zacks Rank #4 (Sell). (Read more: Will Tesla Continue to Disappoint in Q3 Earnings?)
TESLA MOTORS Price and EPS Surprise
TESLA MOTORS Price and EPS Surprise | TESLA MOTORS Quote
Lear Corp. (LEA - Free Report) currently has an Earnings ESP of -0.33% as the Most Accurate estimate of $3.01 stands below the Zacks Consensus Estimate of $3.02. The company holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. We note that Lear Corp. delivered positive earnings surprises in the trailing four quarters, with an average positive surprise of 11.82%.
LEAR CORPORATN Price and EPS Surprise
LEAR CORPORATN Price and EPS Surprise | LEAR CORPORATN Quote
Confidential from Zacks
This week, Zacks researchers have named 7 other stocks that look to break out even sooner than today's Bull of the Day. You can see these time-sensitive tickers free, and access additional trades that are not available to the public.Simply click here>>