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5 Auto Stocks Poised to Beat on Q2 Earnings Amid Coronavirus Woes
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A host of companies belonging to the Auto-Tires-Trucks sector are slated to release quarterly numbers this week. So far, only one S&P 500 sector component –– PACCAR (PCAR - Free Report) –– has reported earnings figures.
With the remaining auto stocks lined up for earnings releases, let us delve deeper to look at the factors that are likely to have influenced the companies’ June-quarter performance.
Automakers around the globe are likely to have struggled with declining car sales amid the economic-slowdown concerns due to the coronavirus pandemic during the quarter under review. Notably, vehicle sales from each of the Detroit 3 carmakers — Ford, General Motors and Fiat Chrysler — dropped year over year during this period.
The pandemic has crippled the auto industry, with the closure of factories, dealerships witnessing lower footfall and disruptions in the global supply chains. Amid the pandemic-related uncertainties, several auto firms have withdrawn their annual guidance and are resorting to cost-containment measures in a bid to preserve financial flexibility. Dividend cuts, buyback suspensions, employee layoffs, pay cuts and hiring freezes have become commonplace. The virus outbreak has resulted in unprecedented challenges for the auto sector, having created a demand shock as consumers’ confidence has dipped significantly. The coronavirus crisis is likely to have dented automakers’ earnings and sales in the quarter to be reported.
Moreover, stricter emission impositions, and shift toward electric and autonomous vehicles have changed the sector’s dynamics. Widespread usage of technology as well as rapid digitization have resulted in the fundamental restructuring of the automotive market. This is likely to have inflated manufacturing vehicles’ costs, which are passed on to consumers, in turn, dampening demand. Meanwhile, technological complications call for high-priced aftersales services, which might have created new opportunities and challenges for auto-equipment manufacturers.
Evidently, overall second-quarter earnings and revenues for the auto sector are projected to tank 228.1% and 47.7%, year over year, per the latest Earnings Preview. In fact, the auto sector’s earnings are likely to decline the most among all the 16 Zacks sectors.
Selecting Potential Winners
Clearly, challenges troubling the auto sector paint a gloomy picture for a number of industry participants this reporting cycle. Amid this backdrop, it is wise to select stocks that are well positioned to beat on earnings in the upcoming releases. However, with a wide range of auto firms thronging the investment space, it is by no means an easy task for investors to select stocks having the potential to deliver better-than-expected earnings.
While it is impossible to be absolutely sure about such outperformers, our proprietary methodology — Earnings ESP — makes it relatively simple. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
A positive Earnings ESP is a chief ingredient of our proven quantitative model for identifying stocks with maximum chances of pulling off a positive surprise. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can further narrow down the list of choices by picking stocks carrying a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that for stocks with the above-mentioned combination, chances of an earnings beat are as high as 70%.
Our Picks
With the Zacks Stock Screener, we have identified five auto stocks poised to trump earnings estimates in the second quarter.
You may consider Lear Corporation (LEA - Free Report) , a manufacturer of automotive seating and electronic systems, which currently carries a Zacks Rank #2 and has an Earnings ESP of +3.50%. The Zacks Consensus Estimate for the quarter’s loss is pinned at $4.98 per share on revenues of $2.14 billion.
Lear’s strategic acquisitions, healthy balance sheet, and temporary cost-reduction measures, including salary deferrals, furloughs, pay cuts and tightening of capex, to preserve cash hold the key to its success. The company is scheduled to announce quarterly results on Aug 4. You can see the complete list of today’s Zacks #1 Rank stocks here.
Another worthwhile option is Magna International Inc. (MGA - Free Report) , which is a manufacturer and supplier of complete automotive components. The company, scheduled to release quarterly results on Aug 7, currently carries a Zacks Rank #2 and has an Earnings ESP of +6.52%. The Zacks Consensus Estimate for the quarter’s loss is pegged at $2.11 per share on revenues of $3.47 billion. The firm’s focus on innovation, technology development, program launches and business expansion through JVs, and hub openings, are encouraging.
Genuine Parts Company (GPC - Free Report) , a manufacturer of automotive seating and electronic systems, also deserves a mention. The firm, which is slated to report results on Jul 30, currently carries a Zacks Rank #3 and has an Earnings ESP of +14.52%. The Zacks Consensus Estimate for the quarter’s earnings is pinned at $1.03 per share on revenues of $4.45 billion. The firm’s acquisitions to improve product offerings and expand its geographical footprint are commendable.
Another stock worth betting on is engine and powertrain manufacturer General Motors Company (GM - Free Report) , which holds a Zacks Rank of 3 and has an Earnings ESP of +18.72%. The Zacks Consensus Estimate for the to-be-reported quarter’s loss is pegged at $1.72 per share on revenues of $20.47 billion. Solid demand for the firm’s profitable trucks and SUVs is likely to have aided its performance. The company is scheduled to announce quarterly numbers on Jul 29.
Investors can also pick Ford Motor Company (F - Free Report) , a designer and manufacturer of cars, trucks, sports utility vehicles. It currently carries a Zacks Rank #3 and has an Earnings ESP of +13.66%. The Zacks Consensus Estimate for the quarter’s loss is pegged at $1.27 per share on revenues of $14.98 billion. Ford’s focus on SUVs and trucks, along with EV launches, has been boding well for the company. The firm is slated to report earnings figures on Jul 30.
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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5 Auto Stocks Poised to Beat on Q2 Earnings Amid Coronavirus Woes
A host of companies belonging to the Auto-Tires-Trucks sector are slated to release quarterly numbers this week. So far, only one S&P 500 sector component –– PACCAR (PCAR - Free Report) –– has reported earnings figures.
With the remaining auto stocks lined up for earnings releases, let us delve deeper to look at the factors that are likely to have influenced the companies’ June-quarter performance.
Automakers around the globe are likely to have struggled with declining car sales amid the economic-slowdown concerns due to the coronavirus pandemic during the quarter under review. Notably, vehicle sales from each of the Detroit 3 carmakers — Ford, General Motors and Fiat Chrysler — dropped year over year during this period.
The pandemic has crippled the auto industry, with the closure of factories, dealerships witnessing lower footfall and disruptions in the global supply chains. Amid the pandemic-related uncertainties, several auto firms have withdrawn their annual guidance and are resorting to cost-containment measures in a bid to preserve financial flexibility. Dividend cuts, buyback suspensions, employee layoffs, pay cuts and hiring freezes have become commonplace. The virus outbreak has resulted in unprecedented challenges for the auto sector, having created a demand shock as consumers’ confidence has dipped significantly. The coronavirus crisis is likely to have dented automakers’ earnings and sales in the quarter to be reported.
Moreover, stricter emission impositions, and shift toward electric and autonomous vehicles have changed the sector’s dynamics. Widespread usage of technology as well as rapid digitization have resulted in the fundamental restructuring of the automotive market. This is likely to have inflated manufacturing vehicles’ costs, which are passed on to consumers, in turn, dampening demand. Meanwhile, technological complications call for high-priced aftersales services, which might have created new opportunities and challenges for auto-equipment manufacturers.
Evidently, overall second-quarter earnings and revenues for the auto sector are projected to tank 228.1% and 47.7%, year over year, per the latest Earnings Preview. In fact, the auto sector’s earnings are likely to decline the most among all the 16 Zacks sectors.
Selecting Potential Winners
Clearly, challenges troubling the auto sector paint a gloomy picture for a number of industry participants this reporting cycle. Amid this backdrop, it is wise to select stocks that are well positioned to beat on earnings in the upcoming releases. However, with a wide range of auto firms thronging the investment space, it is by no means an easy task for investors to select stocks having the potential to deliver better-than-expected earnings.
While it is impossible to be absolutely sure about such outperformers, our proprietary methodology — Earnings ESP — makes it relatively simple. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
A positive Earnings ESP is a chief ingredient of our proven quantitative model for identifying stocks with maximum chances of pulling off a positive surprise. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can further narrow down the list of choices by picking stocks carrying a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that for stocks with the above-mentioned combination, chances of an earnings beat are as high as 70%.
Our Picks
With the Zacks Stock Screener, we have identified five auto stocks poised to trump earnings estimates in the second quarter.
You may consider Lear Corporation (LEA - Free Report) , a manufacturer of automotive seating and electronic systems, which currently carries a Zacks Rank #2 and has an Earnings ESP of +3.50%. The Zacks Consensus Estimate for the quarter’s loss is pinned at $4.98 per share on revenues of $2.14 billion.
Lear’s strategic acquisitions, healthy balance sheet, and temporary cost-reduction measures, including salary deferrals, furloughs, pay cuts and tightening of capex, to preserve cash hold the key to its success. The company is scheduled to announce quarterly results on Aug 4. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lear Corporation Price and EPS Surprise
Lear Corporation price-eps-surprise | Lear Corporation Quote
Another worthwhile option is Magna International Inc. (MGA - Free Report) , which is a manufacturer and supplier of complete automotive components. The company, scheduled to release quarterly results on Aug 7, currently carries a Zacks Rank #2 and has an Earnings ESP of +6.52%. The Zacks Consensus Estimate for the quarter’s loss is pegged at $2.11 per share on revenues of $3.47 billion. The firm’s focus on innovation, technology development, program launches and business expansion through JVs, and hub openings, are encouraging.
Magna International Inc. Price and EPS Surprise
Magna International Inc. price-eps-surprise | Magna International Inc. Quote
Genuine Parts Company (GPC - Free Report) , a manufacturer of automotive seating and electronic systems, also deserves a mention. The firm, which is slated to report results on Jul 30, currently carries a Zacks Rank #3 and has an Earnings ESP of +14.52%. The Zacks Consensus Estimate for the quarter’s earnings is pinned at $1.03 per share on revenues of $4.45 billion. The firm’s acquisitions to improve product offerings and expand its geographical footprint are commendable.
Genuine Parts Company Price and EPS Surprise
Genuine Parts Company price-eps-surprise | Genuine Parts Company Quote
Another stock worth betting on is engine and powertrain manufacturer General Motors Company (GM - Free Report) , which holds a Zacks Rank of 3 and has an Earnings ESP of +18.72%. The Zacks Consensus Estimate for the to-be-reported quarter’s loss is pegged at $1.72 per share on revenues of $20.47 billion. Solid demand for the firm’s profitable trucks and SUVs is likely to have aided its performance. The company is scheduled to announce quarterly numbers on Jul 29.
General Motors Company Price and EPS Surprise
General Motors Company price-eps-surprise | General Motors Company Quote
Investors can also pick Ford Motor Company (F - Free Report) , a designer and manufacturer of cars, trucks, sports utility vehicles. It currently carries a Zacks Rank #3 and has an Earnings ESP of +13.66%. The Zacks Consensus Estimate for the quarter’s loss is pegged at $1.27 per share on revenues of $14.98 billion. Ford’s focus on SUVs and trucks, along with EV launches, has been boding well for the company. The firm is slated to report earnings figures on Jul 30.
Ford Motor Company Price and EPS Surprise
Ford Motor Company price-eps-surprise | Ford Motor Company Quote
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>