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Auto Stock Roundup: GM's EV Push in China, WGO's Dividend Hike & More

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Last week, five major automakers including Ford, Volkswagen, Honda Motor, BMW AG and Volvo Cars finalized a legal agreement with the California Air Resources Board (“CARB”) to cut vehicle emissions in the Golden State. The move brushed aside previous threats from President Trump and would require automakers to comply with tougher emission standards than the federal rules in a bid to curb tailpipe pollution. Under the California agreement, carmakers will be required to increase their average fuel economy from about 38 miles per gallon to about 51 miles by 2026.

The second-quarter earnings season for the auto sector is essentially over. Last week, auto parts retailer, Advance Auto Parts recorded smashing second-quarter results, with the top and the bottom lines not only surpassing estimates but also increasing year over year.

(Read the Last Auto Stock Roundup here).

Recap of the Week’s Most Important Stories

1. Advance Auto Parts (AAP - Free Report) reported adjusted earnings of $2.92 per share for second-quarter 2020 (ended Jul 11, 2020), up 46% from the prior-year number. The earnings figure also beat the Zacks Consensus Estimate of $1.97 per share. Advance Auto Parts generated net revenues of $2,501 million, which beat the Zacks Consensus Estimate of $2,360 million. The revenue figure also rose 7.3% from the year-ago reported figure. For the second quarter, comparable store sales increased 7.5% year on year. The company lifted the temporary suspension of the existing share-repurchase program as of Aug 12, 2020. 

2. General Motors (GM - Free Report) is making a big push to step up electrification game in China, where the company commands a sizable presence. More than 40% of the firm’s new launches over the next five years in the world’s biggest auto market will be electrified models. Beginning 2022, the auto giant intends to launch 5G-connected vehicles in China. The new Cadillac models and most Buick and Chevrolet vehicles will be equipped with 5G connectivity. The company is stepping up the development of solutions for intelligent connected vehicles with its first global “vehicle-to-everything” (V2X) program, which is scheduled to be launched this year, on the Buick GL8 MPV minivan for China.

3. Toyota Motor (TM - Free Report) announced that it will collaborate with Amazon’s cloud computing unit, Amazon Web Services (AWS), to create a platform that would help manage and monetize data gathered from the automaker’s global vehicle fleet. Toyota’s Mobility Services Platform enables data to be collected and reviewed for the development of vehicle services from ride and car sharing to behavior-based insurance and maintenance notifications. This deal extends Toyota's existing relationship with AWS and marks the e-commerce giant’s expanding foray into the transportation business.

4. Winnebago (WGO - Free Report) announced roughly 9% hike in quarterly cash dividend to 12 cents per share. The dividend will be payable on Sep 30, 2020 to shareholders of record as of Sep 16, 2020. The dividend yield, based on the new payout and the last closing market price, is approximately 0.8%.  Notably, the recreational vehicle maker has a reliable dividend history and is committed to maximize shareholders’ value. It has regularly paid quarterly cash dividend for the last 25 quarters.

5. AutoNation (AN - Free Report) announced the decision to shut down the aftermarket collision parts business by 2020-end. The move is in sync with the company’s restructuring program to cut costs and optimize the business. The collision aftermarket parts business generated less than 1% of AutoNation’s Parts and Service gross profit in first-half 2020. With coronavirus-led uncertainty and financial weakness, the firm remains focused on operational efficiency and closure of unprofitable businesses. It should be noted that AutoNation will incur $52 million in charges — including $12 million in cash — in the latter half of 2020 in connection with the discontinuation of the collision parts business.

Price Performance

The following table shows the price movement of some of the major auto players over the past week and six-month period.

In the past week, all stocks have declined apart from Tesla and AutoZone. In the past six months, shares of Tesla, Advance Auto Parts and AutoZone have increased. Tesla has gained the most in the said period.

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