Back to top

Auto Stocks Q1 Earnings: Key Forecasts for GM, BWA and More

Read MoreHide Full Article

The first-quarter earnings season is in full swing. A few automakers have already released their earnings while a majority of them will release theirs in the next few days. On Apr 24, PACCAR Inc. (PCAR - Free Report) and Harley-Davidson Inc. (HOG - Free Report) reported first-quarter earnings. Both the companies reported earnings beat for the quarter.

Per the latest Earnings Preview, 87 companies from the S&P 500 category have already announced first-quarter results as of Apr 20, registering earnings and revenue beat ratios of 82.8% and 67.8%, respectively.

However, on a year-over-year basis, the auto sector’s bottom line in the to-be-reported quarter is expected to record a decline of 9.6% while the top line is likely to fall 3.4%. However, the S&P 500 companies are estimated to record respective 18.3% and 7.7% year-over-year rise in earnings and revenues during the quarter.

An improved economy and shift in consumer preferences toward trucks and sports utility vehicles (SUV) encouraged automakers to launch new models in the U.S. market with an aim to earn their share of profit. In Europe, automakers are witnessing a decline in vehicle sales. Per European Automobile Manufacturers’ Association, vehicle registrations edged down 0.6% in first-quarter 2018. This decline is majorly due to slowing economic growth and uncertain trading regulations, once U.K. pulls itself out of European Union.

Now, let’s evaluate how the four auto companies namely General Motors Company (GM - Free Report) , BorgWarner Inc. (BWA - Free Report) , LKQ Corporation (LKQ - Free Report) and Lear Corporation (LEA - Free Report) are placed ahead of reporting quarterly figures on Apr 26.

We relied on the proven Zacks quantitative model, combining a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) with a positive Earnings ESP, to predict the chances of earnings beat this quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Per our proprietary methodology, Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that with an ideal combination of the two key ingredients — Zacks Rank and ESP — chances of a positive surprise are as high as 70% for the stocks, which are lined up for an earnings release.

Detroit, MI-based General Motors offers a complete range of vehicles to cater to the needs of customers. Its products range from electric cars to heavy-duty full-size trucks. The company offers products under eight distinctive automotive brands namely, Chevrolet, Buick, GMC, Cadillac, Holden, Baojun, Wuling, and Jiefang. Our model does not predict that the company, with an Earnings ESP of -2.21% and a Zacks Rank #3, is likely to beat on earnings as the combination leaves surprise prediction inconclusive.

In the last reported quarter, the company surpassed the Zacks Consensus Estimate. It also beat estimates in the trailing four quarters with an average positive surprise of 18.4%. General Motors has long-term earnings growth rate of 8.4%. (Read more: General Motors to Report Q1 Earnings: What's in Store?)

General Motors Company Price and EPS Surprise

Michigan-based BorgWarner offers efficient and clean technology solutions, essential for combustion, hybrid and electric vehicles. The company offers transfer cases for light trucks and sport utility vehicles along with timing chain systems and automatic transmission. In the last reported quarter, the company pulled off a positive surprise. Further, in the last four reported quarters, it exceeded estimates, leading to an average beat of 7.6%.

The company has long-term growth rate of 8.6%. Per our model, it seems that BorgWarner is likely to beat earnings in Q1 as it has an Earnings ESP of +0.83% and a Zacks Rank of 2. (Read more: Is a Beat in the Cards for BorgWarner in Q1 Earnings?)

BorgWarner Inc. Price and EPS Surprise

Headquartered in Chicago, IL, LKQ is a primary provider of alternative and specialty parts to repair and accessorize vehicles. Few of the products that LKQ offers include replacement systems, components, equipment and parts to repair and accessorize trucks, cars along with recreational and performance vehicles. The company is a Zacks #3 Ranked player and its 0.00% Earnings ESP makes surprise prediction difficult. LKQ has long-term growth rate of 16%.

Last quarter, LKQ missed estimates. However, the company missed estimates in only one of the trailing four quarters while beating earnings on other three occasions. The average earnings surprise was 3.3%. (Read more: LKQ to Report Q1 Earnings: What's in Store for the Stock?)

LKQ Corporation Price and EPS Surprise

Headquartered in Southfield, MI, Lear is a leading supplier of automotive seating systems and electrical systems. Across the globe, the company operates in 257 locations in 39 countries. In the last reported quarter, the company exceeded earnings estimates. In fact, it surpassed earnings estimates in trailing four quarters, recording an average beat of 5.3%.

Our model does not conclusively show that the company is likely to beat on earnings this time around as it has an Earnings ESP of -1.60% and is a #2 Ranked player, which leaves surprise prediction uncertain. (Read more: Lear to Report Q1 Earnings: What's in the Cards?)

Lear Corporation Price and EPS Surprise

In view of the above findings, it appears that General Motors, LKQ and Lear are not expected to come up with an earnings beat in first-quarter 2018 while BorgWarner is likely to beat estimates.

Investor Alert: Breakthroughs Pending

A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.

Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.

Click here to see them >>

More from Zacks Analyst Blog

You May Like

Published in