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Can CARZ ETF Gain Despite Mixed Auto Earnings?

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Automakers have restarted operations with some restrictions for controlling the rising cases related to new strains of coronavirus. Moreover, the pandemic has resulted in changes in the demand and preferences of consumers who are currently showing more interest in purchasing their own vehicles, largely due to concerns about public transportation systems and willingness for road trips. It is also believed that wider coronavirus vaccine rollouts and high chances of another round of fiscal stimulus are making a strong case in favor of faster U.S. economic recovery in 2021. All these factors can help the space recover from the coronavirus outbreak-induced adverse impacts on production and sales of vehicles as carmakers had to shut down facilities in late March across the United States. The outbreak had also slowed down the sector’s sales, with demand being hit hard by high unemployment rates.

Against this backdrop, we take a look at some big automobile earnings releases and see if these can impact ETFs exposed to the space.

Earnings in Focus

On Jan 27, Tesla (TSLA - Free Report) reported earnings per share of 80 cents for fourth-quarter 2020, missing the Zacks Consensus Estimate of 90 cents. This underperformance was largely due to lower-than-expected automotive gross profit. Notably, automotive gross profit came in at $2.24 billion, missing the consensus mark of $2.33 billion. However, the bottom line improved from the year-ago earnings of 43 cents a share. Importantly, the firm posted its first annual net profit in 2020. Total revenues came in at $10.74 billion, beating the consensus mark of $10.13 billion. The top line also delivered year-over-year growth of 45.5%.

Tesla had cash and cash equivalents of $19.38 billion as of Dec 31, 2020, compared with $6.27 billion on Dec 31, 2019.

On Feb 4, Ford Motor Company (F - Free Report) reported fourth-quarter 2020 adjusted diluted earnings per share of 34 cents against the Zacks Consensus estimate of a loss of 7 cents. This served as the third straight earnings beat for the firm. Cost cut and restructuring efforts, primarily in the Europe market, led to the upside. Ford’s consolidated fourth-quarter revenues came in at $36 billion, down 9% year over year. Notably, the company generated automotive revenues of $33.2 billion, which surpassed the Zacks Consensus Estimate of $32.9 billion.

The company reported fourth-quarter adjusted free cash flow (FCF) of $1.9 billion, rising significantly from the year-ago $498 million. Ford had cash and cash equivalents of $25.24 billion as of Dec 31, 2020, compared with $17.50 billion on Dec 31, 2019.

Ford anticipates adjusted EBIT for 2021 between $8 billion and $9 billion, signalling a considerable rise from the 2020 level of $2.8 billion.

On Feb 10, General Motors Company (GM - Free Report) reported adjusted earnings of $1.93 per share in fourth-quarter 2020, outpacing the Zacks Consensus Estimate of earnings of $1.62. In the year-ago quarter, the company recorded earnings of 5 cents per share. Revenues of $37.52 billion outpaced the Zacks Consensus Estimate of $36.90 billion and surged from the year-ago $30.83 billion.

General Motors had cash and cash equivalents of $19.2 billion as of Dec 31, 2020, compared with $19.1 billion in the corresponding period of 2019. Long-term automotive debt stands at $16.2 billion compared with $12.5 billion as of Dec 31, 2019.

On Feb 9, Honda Motor Co., Ltd. (HMC - Free Report) reported earnings of $1.58 per ADR in third-quarter fiscal 2021, outpacing the Zacks Consensus Estimate of 75 cents backed by higher-than-expected revenues. The company reported earnings of 61 cents per share in the year-ago quarter. Quarterly revenues totaled $36.12 billion, topping the Zacks Consensus Estimate of $35.27 billion. Moreover, the top line rose 0.6%, year over year.

Consolidated cash and cash equivalents were ¥2.87 trillion ($27.8 billion) as of Dec 31, 2020. Long-term debt was ¥4.31 trillion ($41.8 billion). For fiscal 2021, the company projects sales of ¥12.95 trillion, down from the prior estimate of ¥13.05 trillion. 

On Feb 10, Toyota Motor Corporation (TM - Free Report) reported third-quarter fiscal 2021 earnings of $5.67 per share, outpacing the Zacks Consensus Estimate of $3.65 on higher-than-expected revenues. Moreover, the bottom line improved from the year-ago earnings of $4.79 a share. Consolidated revenues came in at $78.04 billion, outpacing the consensus mark of $73.57 billion. The top-line figure also rose 7.11% year over year.

Toyota had cash and cash equivalents of ¥4.5 trillion ($43.6 billion) as of Dec 31, 2020. Long-term debt amounted to ¥11.9 trillion ($115.3 billion). At the end of the fiscal third quarter, operating cash flow was ¥1,834 billion, down 8.5% year over year.

Automobile ETF in Focus

In the current scenario, we discuss an ETF that has a relatively higher exposure to the companies discussed.

First Trust NASDAQ Global Auto ETF (CARZ - Free Report)

CARZ tracks the NASDAQ OMX Global Auto Index. It comprises 34 holdings, with the above-mentioned companies carrying 35.5% weight. Its AUM is $67.8 million and expense ratio, 0.70%. The fund has gained 0.5% since Jan 27 (as of Feb 23) (read: 2020 US Auto Sales Slip to 1970s Level: ETFs, Stocks in Focus).

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