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Auto Stock Roundup: Ford Reveals Weak Guidance; Honda, Toyota Outline Expansion Plans
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The auto sector witnessed mixed developments over the last week, which was reflected in the share performance as well. Ford Motor Company (F - Free Report) provided a weak guidance for the first quarter of 2017.
General Motors Company (GM - Free Report) rejected an investor’s proposal to split stocks into two classes as it would impact the financial flexibility of the company. Meanwhile, a large stake in Tesla, Inc. (TSLA - Free Report) was purchased by Chinese giant, Tencent.
While Toyota Motor Corp. (TM - Free Report) entered into a new patent licensing deal with Microsoft Corporation, in relation to connected car technologies, Honda Motor Co., Ltd. (HMC - Free Report) and Ford announced investment plans in the U.S.
1. Ford provided a weak guidance for the first quarter of 2017. The company expects first-quarter adjusted earnings per share in the range of 30–35 cents, lower than the 68 cents reported in the prior-year quarter. The company’s projection also falls short of the Zacks Consensus Estimate of 45 cents per share. The low expectations are attributable to increased costs, lower volumes as well as unfavorable currency translations. Pre-tax income for 2017 continues to be forecast at below the $9 billion recorded in 2016.
Ford has also announced two new recalls affecting 440,000 vehicles that will cost the company roughly $295 million.
Ford currently carries a Zacks Rank #5 (Strong Sell).
2. Tencent, one of China’s most valuable companies, purchased 5% stake worth roughly $1.8 billion in Tesla, per a regulatory filing. This investment reveals investors’ confidence in Tesla, ahead of the Model 3 production. Tesla’s CEO, Elon Musk, has been facing numerous questions regarding the company’s ambitious plans for its latest vehicle. This investment comes at a time when the company is in a significant need for cash. Moreover, Tesla will also receive support for penetrating in the Chinese auto market.
Tesla currently carries a Zacks Rank #3 (Hold).
3. Toyota entered into a new patent licensing deal with Microsoft Corporation in relation to connected car technologies. Per the licensing deal, Microsoft will provide telematics, infotainment, safety and other systems to Toyota. This will help the company to offer alluring connected car experience to its customers. The partnership is expected to enhance the connected car experience for customers.
Alternately, Toyota has recalled about 2.9 million vehicles in Japan, China, Oceania and other regions, due to potential fault in the airbag inflators. The vehicles being recalled include the Corolla Axio sedan and RAV4 SUV crossover. None of the vehicles sold in North America were excluded in this recall.
Toyota currently carries a Zacks Rank #3.
4. General Motors rejected a proposal set forth by an investor, David Einhorn, to split the company’s stock into two classes. Per the investor’s plan, one class of stock could continue paying dividends while the other class would consist of stocks that would support future growth of the company. Per a regulatory filing, the company discarded the plan as it would not help the company increase sales, improve profitability or create higher cash flows. Moreover, General Motors stated that the company’s credit rating would be affected and challenges related to corporate governance could be faced.
The company feels that the plan would create substantial risks and would not benefit investors.
5. Honda announced investment plans worth $85 million in the U.S. The company will use the funds for the development of the first of a multi-phase project, which will help improve vehicle production flexibility, strengthen the logistic efficiency for future vehicle models as well as prepare for future technologies. The investment will also fund the expansion of the south end of Line 1 for Honda's vehicle assembly operations. The initial phase of the project is expected to be constructed by 2018.
Honda currently carries a Zacks Rank #1.
Ford has also revealed $1.2 billion investment plans in three of its Michigan plants. Of the total investment, $850 million will be put into the assembly line for the new Ford Bronco and Ranger, $200 million will be to build a new advanced data center, while $150 million will be used for the capacity expansion of its engine plant that will add 130 new jobs. The investment decisions are partially in line with the agreement that the company had arrived at earlier with the UAW.
Performance
Auto stocks recorded a mixed performance last week. While Advance Auto Parts, Inc. (AAP - Free Report) lost the maximum among the stocks listed below, Teesla was the biggest gainer.
Over the last six months, while Tesla has been the biggest gainer, AutoZone, Inc. (AZO - Free Report) was the worst performer.
Some automakers are expected to report March sales for U.S. in the coming week. Information regarding Musk’s latest project, Neuralink is expected soon.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>
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Auto Stock Roundup: Ford Reveals Weak Guidance; Honda, Toyota Outline Expansion Plans
The auto sector witnessed mixed developments over the last week, which was reflected in the share performance as well. Ford Motor Company (F - Free Report) provided a weak guidance for the first quarter of 2017.
General Motors Company (GM - Free Report) rejected an investor’s proposal to split stocks into two classes as it would impact the financial flexibility of the company. Meanwhile, a large stake in Tesla, Inc. (TSLA - Free Report) was purchased by Chinese giant, Tencent.
While Toyota Motor Corp. (TM - Free Report) entered into a new patent licensing deal with Microsoft Corporation, in relation to connected car technologies, Honda Motor Co., Ltd. (HMC - Free Report) and Ford announced investment plans in the U.S.
(Read the previous roundup here: Auto Stock Roundup for Mar 23, 2017)
Recap of the Week’s Most Important Stories
1. Ford provided a weak guidance for the first quarter of 2017. The company expects first-quarter adjusted earnings per share in the range of 30–35 cents, lower than the 68 cents reported in the prior-year quarter. The company’s projection also falls short of the Zacks Consensus Estimate of 45 cents per share. The low expectations are attributable to increased costs, lower volumes as well as unfavorable currency translations. Pre-tax income for 2017 continues to be forecast at below the $9 billion recorded in 2016.
Ford has also announced two new recalls affecting 440,000 vehicles that will cost the company roughly $295 million.
Ford currently carries a Zacks Rank #5 (Strong Sell).
2. Tencent, one of China’s most valuable companies, purchased 5% stake worth roughly $1.8 billion in Tesla, per a regulatory filing. This investment reveals investors’ confidence in Tesla, ahead of the Model 3 production. Tesla’s CEO, Elon Musk, has been facing numerous questions regarding the company’s ambitious plans for its latest vehicle. This investment comes at a time when the company is in a significant need for cash. Moreover, Tesla will also receive support for penetrating in the Chinese auto market.
Tesla currently carries a Zacks Rank #3 (Hold).
3. Toyota entered into a new patent licensing deal with Microsoft Corporation in relation to connected car technologies. Per the licensing deal, Microsoft will provide telematics, infotainment, safety and other systems to Toyota. This will help the company to offer alluring connected car experience to its customers. The partnership is expected to enhance the connected car experience for customers.
Alternately, Toyota has recalled about 2.9 million vehicles in Japan, China, Oceania and other regions, due to potential fault in the airbag inflators. The vehicles being recalled include the Corolla Axio sedan and RAV4 SUV crossover. None of the vehicles sold in North America were excluded in this recall.
Toyota currently carries a Zacks Rank #3.
4. General Motors rejected a proposal set forth by an investor, David Einhorn, to split the company’s stock into two classes. Per the investor’s plan, one class of stock could continue paying dividends while the other class would consist of stocks that would support future growth of the company. Per a regulatory filing, the company discarded the plan as it would not help the company increase sales, improve profitability or create higher cash flows. Moreover, General Motors stated that the company’s credit rating would be affected and challenges related to corporate governance could be faced.
The company feels that the plan would create substantial risks and would not benefit investors.
General Motors carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5. Honda announced investment plans worth $85 million in the U.S. The company will use the funds for the development of the first of a multi-phase project, which will help improve vehicle production flexibility, strengthen the logistic efficiency for future vehicle models as well as prepare for future technologies. The investment will also fund the expansion of the south end of Line 1 for Honda's vehicle assembly operations. The initial phase of the project is expected to be constructed by 2018.
Honda currently carries a Zacks Rank #1.
Ford has also revealed $1.2 billion investment plans in three of its Michigan plants. Of the total investment, $850 million will be put into the assembly line for the new Ford Bronco and Ranger, $200 million will be to build a new advanced data center, while $150 million will be used for the capacity expansion of its engine plant that will add 130 new jobs. The investment decisions are partially in line with the agreement that the company had arrived at earlier with the UAW.
Performance
Auto stocks recorded a mixed performance last week. While Advance Auto Parts, Inc. (AAP - Free Report) lost the maximum among the stocks listed below, Teesla was the biggest gainer.
Over the last six months, while Tesla has been the biggest gainer, AutoZone, Inc. (AZO - Free Report) was the worst performer.
Company
Last 1-Week Period
Last 6 Months
GM
+3.3%
+11.9%
F
-0.8%
-3.2%
TSLA
+8.8%
+36.0%
TM
-0.5%
-5.0%
HMC
+0.6%
+6.5%
HOG
+0.1%
+15.2%
AAP
-1.1%
+0.4%
AZO
-0.4%
-6.0%
Auto-Tires-Trucks Sector 5YR % Return
Auto-Tires-Trucks Sector 5YR % Return
What’s Next in the Auto Space?
Some automakers are expected to report March sales for U.S. in the coming week. Information regarding Musk’s latest project, Neuralink is expected soon.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>