The earnings performance of the auto sector has taken a positive turn this week, defying projections of a decline as well as overcoming the weak results seen in the initial phase of the season. Nearly 40% of the sector’s companies had posted results as of Oct 26, 2016. These companies recorded a year-over-year improvement of 5.1% in earnings and 6.3% in revenues, per our Earnings Outlook report. In comparison, total S&P 500 companies that had reported till then posted a 3.2% increase in earnings and a 1.9% rise in revenues.
However, the overall projections for the auto sector’s Q3 earnings are still weak. By the end of the earnings season, auto sector earnings and revenues are expected to be down 12.4% 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 1.4%, with revenues also rising 1.4% 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 two auto stocks that are slated to release their third-quarter 2016 results on Oct 28.
The Goodyear Tire & Rubber Company (GT - Free Report) has an Earnings ESP of +3.45% as the Most Accurate estimate of $1.20 stands above the Zacks Consensus Estimate of $1.16. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Goodyear managed to beat earnings estimates in each of the trailing four quarters, thus delivering a positive average surprise of 10.28% over this period. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. (Read more: Will Goodyear’s Earnings Outshine Estimates in Q3?)
Tenneco Inc. currently has an Earnings ESP of -0.67% as the Most Accurate estimate of $1.48 stands below the Zacks Consensus Estimate of $1.49. The company has a Zacks Rank #4 (Sell). We note that Tenneco delivered positive earnings surprises in each of the trailing four quarters, with an average positive surprise of 10.50%.
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 >>
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 earnings performance of the auto sector has taken a positive turn this week, defying projections of a decline as well as overcoming the weak results seen in the initial phase of the season. Nearly 40% of the sector’s companies had posted results as of Oct 26, 2016. These companies recorded a year-over-year improvement of 5.1% in earnings and 6.3% in revenues, per our Earnings Outlook report. In comparison, total S&P 500 companies that had reported till then posted a 3.2% increase in earnings and a 1.9% rise in revenues.
However, the overall projections for the auto sector’s Q3 earnings are still weak. By the end of the earnings season, auto sector earnings and revenues are expected to be down 12.4% 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 1.4%, with revenues also rising 1.4% 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 two auto stocks that are slated to release their third-quarter 2016 results on Oct 28.
The Goodyear Tire & Rubber Company (GT - Free Report) has an Earnings ESP of +3.45% as the Most Accurate estimate of $1.20 stands above the Zacks Consensus Estimate of $1.16. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Goodyear managed to beat earnings estimates in each of the trailing four quarters, thus delivering a positive average surprise of 10.28% over this period. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. (Read more: Will Goodyear’s Earnings Outshine Estimates in Q3?)
Tenneco Inc. currently has an Earnings ESP of -0.67% as the Most Accurate estimate of $1.48 stands below the Zacks Consensus Estimate of $1.49. The company has a Zacks Rank #4 (Sell). We note that Tenneco delivered positive earnings surprises in each of the trailing four quarters, with an average positive surprise of 10.50%.
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 >>
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 GT - FREE