Back to top

Image: Bigstock

Can CARZ ETF Gain Despite Mixed Auto Earnings?

Read MoreHide Full Article

The ‘automobile, tires, trucks’ sector has come up with mixed results this reporting season. Notably, 87.5% of the S&P automobile companies beat on earnings and revenue estimates. Earnings rose 608.9% year over year and revenues 11%, per the Earnings Trends  issued on May 12.

The coronavirus pandemic had affected production and sales of vehicles due to shutdown of facilities. However, the industry is expected to rebound amid economic recovery from the pandemic-led slowdown. The U.S. economy seems to be strongly rebounding from the coronavirus led-slowdown. Several factors like reopening of the U.S. economy, accelerated coronavirus vaccine rollout and a solid fiscal support are raising consumer optimism.

Vehicle demand is on the rise, thanks to growing inclination toward personal mobility and easier credit conditions. Electric vehicles (EV) are seeing increasing popularity with each passing day and are likely to buoy the prospects of automakers.

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 Apr 26, Tesla (TSLA - Free Report) reported earnings per share of 93 cents for first-quarter 2021, beating the Zacks Consensus Estimate of 79 cents per share. The outperformance stemmed from higher-than-expected automotive gross profit, which came in at $2.39 billion, outpacing the consensus mark of $2.09 billion. The earnings figure also compared favorably with the prior-year quarter’s number of 25 cents per share. Revenues rose to $10.39 billion, beating the consensus mark of $9.92 billion. The top line also witnessed year-over-year growth of 74%. During the first quarter, Tesla reported delivery and production of 184,877 and 180,338 vehicles, reflecting a year-over-year increase of 109% and 76%, respectively.

Tesla had cash and cash equivalents of $17.14 billion as of Mar 31, 2021, compared with $19.38 billion as of Dec 31, 2020.

On Apr 28, Ford Motor Company (F - Free Report) reported first-quarter 2021 adjusted earnings per share of 89 cents, surpassing the Zacks Consensus Estimate of earnings of 16 cents per share. In the prior-year quarter, adjusted loss were 23 cents per share. Higher-than-expected revenues, primarily in Europe and North America markets, led to the outperformance.

During the reported quarter, Ford reported automotive revenues of $33.5 billion, which outpaced the Zacks Consensus Estimate of $31.1 billion. Ford had cash and cash equivalents of $21.83 billion as of Mar 31, 2021, compared with $25.24 billion on Dec 31, 2020.

On May 5, General Motors Company (GM - Free Report) reported adjusted earnings of $2.25 per share for first-quarter 2021, beating the Zacks Consensus Estimate of $1.02. Stronger-than-expected contribution from the North American and International segments led to the outperformance. The bottom line was also significantly higher than the year-ago earnings of 62 cents per share amid cost-containment initiatives, and robust demand for SUVs as well as pickups. The company reported revenues of $32.47 billion, down from the year-ago figure of $32.71 billion. Also, the revenue figure surpassed the Zacks Consensus Estimate of $33.26 billion.

General Motors had cash and cash equivalents of $21.6 billion as of Mar 31, 2021, compared with $19.9 billion at 2020-end. The company recorded adjusted negative automotive free cash flow (FCF) of $1.9 billion for first-quarter 2021, comparing unfavorably with negative FCF of $903 million in the prior-year period.

On May 14, Honda Motor Co., Ltd. (HMC - Free Report) reported earnings of $1.17 per American depositary receipt for fourth-quarter fiscal 2021, surpassing the Zacks Consensus Estimate of 43 cents on higher-than-anticipated revenues. The bottom line turned around from the year-ago loss of 16 cents per share. Quarterly revenues totaled $34.20 billion, outpacing the Zacks Consensus Estimate of $33.12 bllion. Moreover, the top line inched up 7.7% year on year.

Consolidated cash and cash equivalents were ¥2.76 trillion ($24.9 billion) as of Mar 31, 2021. Long-term debt was ¥4.71 trillion ($42.6 billion).

On May 12, Toyota Motor Corporation (TM - Free Report) reported fourth-quarter fiscal 2021 earnings of $5.18 per share, which handily surpassed the Zacks Consensus Estimate of $3.45 on higher-than-expected revenues. Moreover, the bottom line jumped from the year-ago earnings of 45 cents a share. Consolidated revenues came in at $72.56 billion, beating the consensus mark of $70.78 billion. The top-line figure also climbed 11.3% year over year.

Toyota had cash and cash equivalents of ¥3.3 trillion ($29.6 billion) as of Mar 31, 2021. Long-term debt amounted to ¥12 trillion ($108.9 billion).

Automobile ETF in Focus

In the current scenario, it is prudent to discuss the following ETF that has a relatively higher exposure to the companies discussed.

First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report)

The investment objective of the fund is to seek investment results that correspond generally to the price and yield, before the fund's fees and expenses, of an equity index called the NASDAQ OMX Global Auto Index. It comprises 33 holdings with the above-mentioned companies carrying 36.1% weight. Its AUM is $61.7 million and expense ratio, 0.70%. The fund carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook. The funds has lost 3.7% since Apr 27 (as of May 18) (read: 4 Sector ETFs & Stocks to Shine Despite Soft April Retail Sales).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>