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Sony and Motorcar Parts of America have been highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – February 16, 2023 – Zacks Equity Research shares Sony (SONY - Free Report) as the Bull of the Day and Motorcar Parts of America (MPAA - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Allison Transmission Holdings (ALSN - Free Report) , Genuine Parts Co. (GPC - Free Report) and Lucid Group (LCID - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

The stock market is clawing back from a rough 2022. Since October of last year, the bid has re-entered the fray. It's led to some serious bounces in many different industries. Looking at the YTD numbers about six weeks into this year, the Consumer Cyclical sector is already up 18.8%, while Technology is right behind it at 17.7%. However, there are other sectors like Utilities that are actually down on the year. That means that the "dart board" approach is not working.

One way to tilt the odds in your favor is by leaning on the strength of the Zacks Rank. Stocks in the good graces of our Zacks Rank have the strongest earnings trends. One such stock is today's Bull of the Day, Sony.

Sony Group Corporation designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets in Japan, the United States, Europe, China, the Asia-Pacific, and internationally. The company distributes software titles and add-on content through digital networks; network services related to game, video, and music content; and home and portable game consoles, packaged software, and peripheral devices. It also develops, produces, markets, and distributes recorded music; publishes music; and produces and distributes animation titles, game applications, and various services for music and visual products.

The reason for the favorable Zacks Rank is that over the last 30 days, two analysts have increased their earnings estimates for the current year and next year. The bullish moves have pushed up the current year Zacks Consensus Estimate from $5.27 to $5.49 while next year's number is up from $5.81 to $6.07. That would represent a return to earnings growth next year. Current year growth numbers call for a 12.5% contraction in earnings this year on virtually unchanged year-over-year earnings.

Bear of the Day:

The market has been on fire since October. A good chunk of that move has come this year. There are several areas of the market which have been red hot, but there are other areas that have cooled down a bit. When the market takes a pause, you don't want to be left holding the bag with a stock that has been seeing its earnings go in the wrong direction. One way to avoid these stocks is by leaning on the time-tested strategy of our Zacks Rank.

Stocks which are not in the good graces of our Zacks Rank have seen their earnings estimates shrink. Among those stocks are today's Bear of the Day, Motorcar Parts of America. Motorcar Parts of America, Inc. manufactures, remanufactures, and distributes heavy-duty truck, industrial, marine, and agricultural application replacement parts. The company offers rotating electrical products, including alternators and starters; wheel hub assemblies and bearings; and brake-related products comprising brake calipers, brake boosters, brake rotors, brake pads, and brake master cylinders. 

Currently, MPAA is a Zacks Rank #5 (Strong Sell). The reason for the unfavorable rank is the downside earnings revisions coming from analysts over the last week. Analysts have slashed their numbers for the current quarter, next quarter, current year and next year. The bearish moves have cut the Zacks Consensus Estimate for the current year from $1.82 to $1.12 while next year's number is off from $2.50 down to the same $1.12.

The Automotive – Replacement Parts industry ranks in the Bottom 13% of our Zacks Industry Rank.

Additional content:

Expect a Beat from These 3 Auto Stocks This Earnings Season

The Auto-Tires-Trucks sector is more than halfway through the Q4 earnings season. The picture thus far has been pretty decent despite supply chain issues and economic worries. So far, seven S&P 500 sector components — Tesla, Ford, General Motors, PACCAR, O'Reilly Automotive, Cummins and BorgWarner — have reported quarterly numbers. While Ford and Cummins failed to beat earnings estimates, the other five companies managed to pull off a surprise.

Per the Earnings Trend report dated Feb 1, the auto sector's earnings for Q4 are expected to grow 62.1% on a year-over-year basis. As for revenues, they are estimated to rise 21.4% year over year.

With a host of companies still left to release fourth-quarter 2022 results, we have identified, with the help of the Zacks Stock Screener, a few auto players — Allison Transmission HoldingsGenuine Parts Co. and Lucid Group — which are positioned to outshine the Zacks Consensus Estimate in fourth-quarter earnings. Before we discuss the companies, let's take a look at the factors shaping the quarterly performance of automotive companies.

Factors in Play

The fourth quarter of 2022 was a mixed bag for the auto space, with some automakers witnessing a year-over-year increase in the number of vehicles sold while others saw a decline. In general, what aided the industry was the gradual abatement of chip woes and a slight improvement in supply chain systems.

As such, inventory levels were on the rise. Inventory levels in December were more than one million units for the third consecutive month, per J.D. Power and LMC Automotive. Per TrueCar, the total new light-vehicle inventory, including fleet and commercial vehicles, totaled 1.8 million in December 2022, up from 1.1 million recorded in December 2021.

Despite economic uncertainty, the demand for vehicles largely managed to show resilience during the last three months of 2022. The rising deliveries of new energy vehicles (including all-electric, hybrids and fuel-cell) are expected to have fueled revenues. However, for the less-affluent and subprime consumers, the rising cost of financing is expected to have played spoilsport. Per estimates of J.D. Power and LMC Automotive, average interest rates for new vehicle loans were up around 250 basis points from the year-ago levels. High interest rates eat away vehicle buyers' willingness and ability to purchase. This may have limited revenues to some extent.

As for the average price of vehicles, used car prices are on a decline, while new car prices during the quarter under discussion have remained high. High new vehicle prices are likely to have offset commodity cost inflation partially. High costs of raw materials, manufacturing inefficiency, rising freight and fuel costs may have limited margins.

Picking Potential Winners

While it is not possible to be sure about which companies are well positioned to beat earnings estimates, 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.

The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

You can see the complete list of today's Zacks #1 Rank stocks here.

Our research shows that for stocks with the abovementioned combination, the chances of an earnings beat are as high as 70%.

Our Choices

Allison: Strategic buyouts and frequent product launches are likely to aid Allison's upcoming results. FracTran, TerraTran and 3414 Regional Haul Series along with Allison's eGen Power portfolio are likely to have secured business wins, thereby aiding fourth-quarter results. The Zacks Consensus Estimate for revenues from ALSN's North America On-Highway segment is pegged at $327 million, up from $281 million generated in the fourth quarter of 2021. The company's upbeat 2022 projections also spark optimism for the upcoming quarter's results.

Allison has an Earnings ESP of +2.23% and a Zacks Rank #2. This auto equipment provider is scheduled to release fourth-quarter results today. The Zacks Consensus Estimate for Allison's to-be-reported quarter's earnings and revenues is pegged at $1.21 per share and $676 million, respectively. ALSN surpassed earnings estimates in three of the trailing four quarters and missed on the other, with the average surprise being 10.3%.

Lucid: Lucid manufactured 3,493 vehicles in the fourth quarter of 2022 at its manufacturing facility in Arizona. This was a new record and the figure was up 53% sequentially. Thanks to the solid production during the three months that ended Dec 31, the company surpassed its 2022 output target of 6000-7000 vehicles. During the quarter under discussion, it delivered 1,932 vehicles, marking a jump of 38.2% from the third quarter of 2022. Robust customer demand for Lucid Air is likely to have boosted fourth-quarter revenues.

Lucid has an Earnings ESP of +3.90% and a Zacks Rank #2. This EV maker is scheduled to release fourth-quarter results on Feb 22. The Zacks Consensus Estimate for Lucid's to-be-reported quarter's loss and revenues is pegged at 39 cents per share and $290 million, respectively. LCID surpassed earnings estimates in two of the trailing four quarters for as many misses, with the average surprise being 11.2%.

Genuine Parts: The increase in the average age of vehicles (12.2 years according to IHS Markit data) is likely to have positively impacted sales of Genuine Parts' products. For the smooth functioning of aging vehicles, customers have been spending heavily to replace any faulty parts and components. This is expected to have boosted GPC's revenues. Encouragingly, the Zacks Consensus Estimate for the firm's fourth-quarter revenues from the Automotive and Industrial segments is pegged at $3,281 million and $1,997 million, indicating a rise from $3,190 million and $1,613 million, respectively, in the previous-year quarter.

Genuine Parts has an Earnings ESP of +5.37% and a Zacks Rank #2. This auto replacement parts provider is scheduled to release fourth-quarter results on Feb 23. The Zacks Consensus Estimate for GPC's to-be-reported quarter's earnings and revenues is pegged at $1.89 per share and $5.33 billion, respectively. Genuine Parts surpassed earnings estimates in the trailing four quarters, with the average surprise being 9.84%.

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