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Auto Earnings Downbeat: Time to Buy the ETF on Dip?
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The pure-play auto ETF First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report) couldn’t enjoy the trade truce deal between President Trump and the European Commission chief Jean-Claude Juncker on Jul 25, as earnings from biggies took a hit.
The Trump administration imposed a 25% tariff on steel imports and 10% on aluminum imports from some countries including the EU. There were also threats from Washington to the European car industry, which has now taken a back seat and should have pushed up the price of CARZ on Jul 25. But downbeat earnings results from General Motors Company (GM - Free Report) and Ford (F - Free Report) Motors spoilt the sport for the fund, which slid about 1.8% (read: U.S. Auto Tariff Risk Put These ETFs and Stocks in Focus).
Against this backdrop, we highlight two earnings reports from sector biggies. Let’s delve a little deeper.
Inside the Results
General Motors Company reported second-quarter 2018 adjusted earnings per share of $1.81, down 4.2% from the prior-year quarter. The bottom line also lagged the Zacks Consensus Estimate of $1.84. Significant rise in commodity costs and unfavorable foreign exchange affected the results. General Motors reported revenues of $36.8 billion, down 0.6% from the year-ago quarter figure. Further, revenues came short of the Zacks Consensus Estimate of $37.0 billion. A total miss punished the stock, which dived more than 4.6% in the key trading session on Jul 25.
Ford came up with mixed results. Its quarterly adjusted earnings of 27 cents per share, reported after market close, missed the Zacks Consensus Estimate of 31 cents and declined from 56 cents a year ago. Ford posted revenues of $35.91 billion, surpassing the Zacks Consensus Estimate by 1.05% but decreased from year-ago revenues of $37.11 billion. Since the company’s Asia Pacific and Europe regions suffered a challenging quarter, Ford lowered its full-year 2017 adjusted EPS range to $1.30 to $1.50.
To Sum Up
As many as 44.4% of auto companies have reported so far this reporting cycle, with earnings down 1.2% and revenues up 3.2%, per the Earnings Trends issued on Jul 25. For the entire Q2, earnings are expected to be down 11% on 1.6% higher revenues.
However, the picture looks bright for the third quarter as earnings are projected to jump 10.5% on 7.4% higher revenues. Added to this, cues of relief in the European auto sector thanks to the latest EU-US reconciliation should favor the fund as a whole.
The fund has the highest exposure to Japan (35.38%), followed by the United States (21.52%) and Germany (19.16%). So, gutsy investors impressed by the near-term future of the sector may buy the dip. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (see all Consumer Discretionary ETFs here).
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Auto Earnings Downbeat: Time to Buy the ETF on Dip?
The pure-play auto ETF First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report) couldn’t enjoy the trade truce deal between President Trump and the European Commission chief Jean-Claude Juncker on Jul 25, as earnings from biggies took a hit.
The Trump administration imposed a 25% tariff on steel imports and 10% on aluminum imports from some countries including the EU. There were also threats from Washington to the European car industry, which has now taken a back seat and should have pushed up the price of CARZ on Jul 25. But downbeat earnings results from General Motors Company (GM - Free Report) and Ford (F - Free Report) Motors spoilt the sport for the fund, which slid about 1.8% (read: U.S. Auto Tariff Risk Put These ETFs and Stocks in Focus).
Against this backdrop, we highlight two earnings reports from sector biggies. Let’s delve a little deeper.
Inside the Results
General Motors Company reported second-quarter 2018 adjusted earnings per share of $1.81, down 4.2% from the prior-year quarter. The bottom line also lagged the Zacks Consensus Estimate of $1.84. Significant rise in commodity costs and unfavorable foreign exchange affected the results. General Motors reported revenues of $36.8 billion, down 0.6% from the year-ago quarter figure. Further, revenues came short of the Zacks Consensus Estimate of $37.0 billion. A total miss punished the stock, which dived more than 4.6% in the key trading session on Jul 25.
Ford came up with mixed results. Its quarterly adjusted earnings of 27 cents per share, reported after market close, missed the Zacks Consensus Estimate of 31 cents and declined from 56 cents a year ago. Ford posted revenues of $35.91 billion, surpassing the Zacks Consensus Estimate by 1.05% but decreased from year-ago revenues of $37.11 billion. Since the company’s Asia Pacific and Europe regions suffered a challenging quarter, Ford lowered its full-year 2017 adjusted EPS range to $1.30 to $1.50.
To Sum Up
As many as 44.4% of auto companies have reported so far this reporting cycle, with earnings down 1.2% and revenues up 3.2%, per the Earnings Trends issued on Jul 25. For the entire Q2, earnings are expected to be down 11% on 1.6% higher revenues.
However, the picture looks bright for the third quarter as earnings are projected to jump 10.5% on 7.4% higher revenues. Added to this, cues of relief in the European auto sector thanks to the latest EU-US reconciliation should favor the fund as a whole.
The fund has the highest exposure to Japan (35.38%), followed by the United States (21.52%) and Germany (19.16%). So, gutsy investors impressed by the near-term future of the sector may buy the dip. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (see all Consumer Discretionary ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>