The performance of the auto sector has been weak so far in Q3, with a few exceptions like General Motors Co. (GM - Free Report) . 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 Preview report. In comparison, total S&P 500 companies that had reported till then posted a 3.3% increase in earnings and a 1.8% rise in revenues.
The 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. With all these factors in mind, let’s see what awaits these four auto stocks that are slated to release their third-quarter 2016 results on Oct 27.
Ford Motor Co. has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 21 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises. Ford managed to beat earnings estimates in two of the trailing four quarters and missed in one, thus delivering a positive average surprise of 15.8% over this period. The company currently carries a Zacks Rank #5 (Strong Sell). (Read more: Will Ford Disappoint Investors This Earnings Season?)
LKQ Corp. (LKQ - Free Report) currently has an Earnings ESP of -2.22% as the Most Accurate estimate of 44 cents stands below the Zacks Consensus Estimate of 45 cents. The company has a Zacks Rank #3 (Hold). We note that LKQ Corp. delivered positive earnings surprises in three of the trailing four quarters, with an average positive surprise of 5.21%.
Autoliv, Inc. (ALV - Free Report) has an Earnings ESP of +2.17% as the Most Accurate estimate of $1.41 stands above the Zacks Consensus Estimate of $1.38. The company surpassed earnings estimates in the trailing four quarters, with an average beat of 7.37%. Autoliv currently holds a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BorgWarner Inc.’s (BWA - Free Report) Earnings ESP is -1.30% because the Most Accurate estimate is 76 cents, while the Zacks Consensus Estimate is pegged at 77 cents. It has delivered a positive surprise in each of the trailing four quarters, with an average of 2.68%. The company carries a Zacks Rank #3. (Read more: BorgWarner Q3 Earnings: Will the Stock Disappoint?).
Zacks' Best Investment Ideas for Long-Term Profit
Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information?Click here >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
The performance of the auto sector has been weak so far in Q3, with a few exceptions like General Motors Co. (GM - Free Report) . 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 Preview report. In comparison, total S&P 500 companies that had reported till then posted a 3.3% increase in earnings and a 1.8% rise in revenues.
The 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. With all these factors in mind, let’s see what awaits these four auto stocks that are slated to release their third-quarter 2016 results on Oct 27.
Ford Motor Co. has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 21 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises. Ford managed to beat earnings estimates in two of the trailing four quarters and missed in one, thus delivering a positive average surprise of 15.8% over this period. The company currently carries a Zacks Rank #5 (Strong Sell). (Read more: Will Ford Disappoint Investors This Earnings Season?)
LKQ Corp. (LKQ - Free Report) currently has an Earnings ESP of -2.22% as the Most Accurate estimate of 44 cents stands below the Zacks Consensus Estimate of 45 cents. The company has a Zacks Rank #3 (Hold). We note that LKQ Corp. delivered positive earnings surprises in three of the trailing four quarters, with an average positive surprise of 5.21%.
Autoliv, Inc. (ALV - Free Report) has an Earnings ESP of +2.17% as the Most Accurate estimate of $1.41 stands above the Zacks Consensus Estimate of $1.38. The company surpassed earnings estimates in the trailing four quarters, with an average beat of 7.37%. Autoliv currently holds a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BorgWarner Inc.’s (BWA - Free Report) Earnings ESP is -1.30% because the Most Accurate estimate is 76 cents, while the Zacks Consensus Estimate is pegged at 77 cents. It has delivered a positive surprise in each of the trailing four quarters, with an average of 2.68%. The company carries a Zacks Rank #3. (Read more: BorgWarner Q3 Earnings: Will the Stock Disappoint?).
Zacks' Best Investment Ideas for Long-Term Profit
Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information?Click here >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on F - FREE
Get the latest research report on ALV - FREE
Get the latest research report on BWA - FREE
Get the latest research report on GM - FREE
Get the latest research report on LKQ - FREE