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Beat Ratios Upbeat in Auto Earnings: Time to Buy the ETF and Stocks?
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The auto industry is among the few sectors that has fallen prey to U.S. President Trump’s steel and aluminum tariff announcements. The sector is a big consumer of steel, which makes the bottom line of auto companies vulnerable to rising raw material costs. Also, changing preferences of buyers from traditional passenger cars to SUVs and crossovers is another threat to the sector (read: Auto ETFs & Stocks Worth Buying Despite Weak April Sales).
Still, we can see the underlying momentum is nothing but recovering. Most of the sector biggies came up with both line beats this earnings season. Almost all auto companies under the S&P 500 coverage reported Q1 earnings, of which 77.8% stocks beat on both lines, per Earnings Trends issued on May 2, 2018.
Against this backdrop, we highlight three earnings reports from sector biggies. Let’s delve a little deeper.
General Motors Company (GM - Free Report) reported first-quarter 2018 adjusted earnings per share of $1.43, down 18.3% from the prior-year quarter. However, the bottom line comfortably beat the Zacks Consensus Estimate of $1.22. General Motors’ crossover sales in first-quarter 2018 rose 23% on a year-over-year basis. General Motors reported revenues of $36.1 billion, reflecting a decline of 3.1% from the year-ago quarter. However, revenues surpassed the Zacks Consensus Estimate of $34.1 billion.
Ford Motor Co. (F - Free Report) posted adjusted earnings per share of 43 cents in the first quarter of 2018. The reported figure was 3 cents higher than the year-ago figure. Also, earnings beat the Zacks Consensus Estimate of 41 cents per share. During the reported quarter, Ford logged automotive revenues of $39 billion, up from the prior-year quarter figure of $36.5 billion. Its Zacks Consensuses Estimate for revenues was $37 billion.
Honda Motor Co. Ltd. (HMC - Free Report) reported consolidated income of ¥107.7 billion or ¥60.59 per share (56 cents per ADR) in the fourth quarter of fiscal 2018 (ended Mar 31, 2018), up 12.3% from the year-ago period. The Zacks Consensus Estimate for earnings per share during the reported quarter was 46 cents. Consolidated sales revenues increased 4% year over year to ¥3.91 trillion ($36.1 billion). The figure surpassed the Zacks Consensus Estimate of $34.7 billion. The year-over-year increase can be attributed to higher revenues in all business operations despite unfavorable foreign currency translations.
In the current scenario, we believe it is prudent to discuss the following ETFs that have a pure focus on auto companies.
First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report)
This fund focuses on providing exposure to the global automotive sector. It has AUM of $20.50 million and charges a fee of 70 basis points a year. It has an 8.05% allocation to Toyota, 7.71% to Ford, 7.69% to General Motors and 7.61% to Honda. The fund has a Zacks Rank #3 (Hold) with a High risk outlook (see all Consumer Discretionary ETFs here).
To Sum Up
The fund has lost about 0.6% since Apr 25. Earnings beat hardly benefited the fund as investors mainly focused on weak April sales and punished the fund. So, gutsy investors impressed by the earnings beat of the sector may buy the dip.
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Beat Ratios Upbeat in Auto Earnings: Time to Buy the ETF and Stocks?
The auto industry is among the few sectors that has fallen prey to U.S. President Trump’s steel and aluminum tariff announcements. The sector is a big consumer of steel, which makes the bottom line of auto companies vulnerable to rising raw material costs. Also, changing preferences of buyers from traditional passenger cars to SUVs and crossovers is another threat to the sector (read: Auto ETFs & Stocks Worth Buying Despite Weak April Sales).
Still, we can see the underlying momentum is nothing but recovering. Most of the sector biggies came up with both line beats this earnings season. Almost all auto companies under the S&P 500 coverage reported Q1 earnings, of which 77.8% stocks beat on both lines, per Earnings Trends issued on May 2, 2018.
Against this backdrop, we highlight three earnings reports from sector biggies. Let’s delve a little deeper.
General Motors Company (GM - Free Report) reported first-quarter 2018 adjusted earnings per share of $1.43, down 18.3% from the prior-year quarter. However, the bottom line comfortably beat the Zacks Consensus Estimate of $1.22. General Motors’ crossover sales in first-quarter 2018 rose 23% on a year-over-year basis. General Motors reported revenues of $36.1 billion, reflecting a decline of 3.1% from the year-ago quarter. However, revenues surpassed the Zacks Consensus Estimate of $34.1 billion.
Ford Motor Co. (F - Free Report) posted adjusted earnings per share of 43 cents in the first quarter of 2018. The reported figure was 3 cents higher than the year-ago figure. Also, earnings beat the Zacks Consensus Estimate of 41 cents per share. During the reported quarter, Ford logged automotive revenues of $39 billion, up from the prior-year quarter figure of $36.5 billion. Its Zacks Consensuses Estimate for revenues was $37 billion.
Honda Motor Co. Ltd. (HMC - Free Report) reported consolidated income of ¥107.7 billion or ¥60.59 per share (56 cents per ADR) in the fourth quarter of fiscal 2018 (ended Mar 31, 2018), up 12.3% from the year-ago period. The Zacks Consensus Estimate for earnings per share during the reported quarter was 46 cents. Consolidated sales revenues increased 4% year over year to ¥3.91 trillion ($36.1 billion). The figure surpassed the Zacks Consensus Estimate of $34.7 billion. The year-over-year increase can be attributed to higher revenues in all business operations despite unfavorable foreign currency translations.
In the current scenario, we believe it is prudent to discuss the following ETFs that have a pure focus on auto companies.
First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report)
This fund focuses on providing exposure to the global automotive sector. It has AUM of $20.50 million and charges a fee of 70 basis points a year. It has an 8.05% allocation to Toyota, 7.71% to Ford, 7.69% to General Motors and 7.61% to Honda. The fund has a Zacks Rank #3 (Hold) with a High risk outlook (see all Consumer Discretionary ETFs here).
To Sum Up
The fund has lost about 0.6% since Apr 25. Earnings beat hardly benefited the fund as investors mainly focused on weak April sales and punished the fund. So, gutsy investors impressed by the earnings beat of the sector may buy the dip.
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 >>