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Mixed Earnings & Trade Worries Weigh on Auto ETF

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The pure-play auto ETF First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report) has been under pressure amid recent quarterly earnings releases.No concrete resolution to U.S.-China trade tensions and mixed earnings from some sector biggies weighed on the fund.

The trade spat is one of the key threats as U.S. auto companies earn about 12% revenues from China. With Beijing slamming tariffs on U.S. auto imports, CARZ has all reasons to worry (read: U.S., China to Reach a Trade Deal? ETF Areas to Gain).

Against this backdrop, we highlight earnings reports from a few sector biggies. Let’s delve a little deeper.

Earnings in Detail

General Motors Company (GM - Free Report) reported fourth-quarter 2018 adjusted earnings per share of $1.43, down 13.3% from the prior-year quarter. However, the bottom line surpassed the Zacks Consensus Estimate of $1.21. General Motors reported revenues of $38.4 billion, up 1.8% from the year-ago quarter. Further, revenues surpassed the Zacks Consensus Estimate of $37 billion.

In late-January,Ford Motor Co. (F - Free Report) reported fourth-quarter 2018 adjusted earnings per share of 30 cents, missing the Zacks Consensus Estimate of 31 cents. In the prior-year quarter, adjusted earnings were 39 cents per share. Results were impacted by challenges faced by the company in the markets of China and Europe.Ford logged automotive revenues of $38.7 billion, up from the prior-year figure of $38.5 billion as well as above the Zacks Consensus Estimate of $37 billion.

In early-February,Honda Motor Co. Ltd. (HMC - Free Report) reported operating profit of ¥170.1 billion ($1.51 billion) for the third quarter of fiscal 2019, down 40.2% from the year-ago period. Decreased sales revenues and model mix, along with rise in selling, general and administrative expenses, led to the decline in operating profit.

In the reported quarter, earnings per share attributable to owners of the parent were ¥95.61, marking a decline from the year-ago figure of ¥318.50. Revenues increased 0.4% year over year to ¥3.97 trillion ($35.3 billion). The rise can be attributed to higher sales revenues at motorcycle and financial services businesses, partly offset by the effects of the foreign currency translation. The Zacks Consensus Estimate for Honda’s third-quarter fiscal 2019 revenues was $35.3 billion.

Toyota Motor Corporation’s (TM - Free Report) earnings were $1.11 per ADR in third-quarter fiscal 2019 (ended Dec 31, 2018). Earnings missed the Zacks Consensus Estimate of $2.80. Toyota’s total net revenues rose 3% year over year to $69.04 billion (¥7.8 trillion), which surpassed the Zacks Consensus Estimate of $68.2 billion.

To Sum Up

As many as 55.6% of the auto companies in the S&P 500 have released results so far this reporting cycle, with earnings down 10.1% and revenues down 0.6%, per the Earnings Trends issued on Feb 6. For the entire Q4, earnings are expected to be down 9.5% on 0.2% higher revenues.

The earnings picture has been downbeat enough to put auto stocks under pressure. The auto companies lost in the range of 1% to 10.1% in the past five days -- the key reporting period. The pureplay fund was down 3.2% in this time frame.

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