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Automobile ETFs in Focus Post Mixed Earnings

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The automobile/tires/trucks sector has reported mixed results so far this earnings season. Of all the S&P industrial companies, 87.5% beat on the bottom line while 50% surpassed revenue estimates. Earnings have risen 3.1% and revenues have declined 1.6% year over year, per the Earnings Trends issued on May 15 (read: 5 Top-Ranked Stocks in S&P 500 ETF Up More Than 50%).

Though concerns over the escalating Sino-US trade spat have been bothering all sectors, the Trump administration is likely to delay tariffs on imported cars and parts for a minimum of six months, according to CNBC and Reuters. Analysts are of the opinion that the decision is an attempt to prevent the ongoing trade conflict from getting intensified as it is already taking a toll on the global economy.

Against this backdrop, we take a look at some big automobiles earnings releases and see if these can impact ETFs exposed to the space.

Earnings in Focus

On Apr 25, Ford Motor Company (F - Free Report) reported first-quarter 2019 adjusted earnings per share of 44 cents, beating the Zacks Consensus Estimate of 26 cents. In the prior-year quarter, adjusted earnings were 43 cents per share. Adjusted earnings before income and taxes (EBIT) in the first quarter were $2.4 billion, reflecting an increase of $0.3 billion from the year-ago quarter. During the reported quarter, Ford logged automotive revenues of $37.2 billion, surpassing the Zacks Consensus Estimate of $36.4 billion. In the prior-year quarter, the figure was $39 billion.

Ford had cash and cash equivalents of $20.8 billion as of Mar 31, 2019, compared with $16.7 billion as of Dec 31, 2018. The stock has gained 10.6% since the earnings release (as of May 16).

On Apr 30, General Motors Company (GM - Free Report) reported adjusted earnings of $1.41 per share in first-quarter 2019, down 1.4% from the prior-year quarter. However, the bottom line surpassed the Zacks Consensus Estimate of $1.09. The company reported revenues of $34.9 billion, down 3.4% from the year-ago quarter. Further, revenues missed the Zacks Consensus Estimate of $35.8 billion. During the reported quarter, total sales for the wholesale unit declined to 1.10 million from 1.16 million in the first quarter of 2018. Worldwide retail units sold fell to 1.88 million from 2.10 million in the year-ago quarter.

General Motors had cash and cash equivalents of $17.2 billion as of Mar 31, 2019, compared with $20.8 billion as of Dec 31, 2018. Adjusted automotive free cash flow during the reported quarter was $3.9 billion versus $3.3 billion in the prior-year quarter. The stock has lost 6.6% since the earnings release (as of May 16).

On May 8, Honda Motor Co., Ltd. (HMC - Free Report) reported operating profit of ¥42.4 billion in the fourth quarter of fiscal 2019, down 66.6% from a year ago. Profit before income taxes declined 41.7% to ¥111.1 billion. Loss per share attributable to owners of the parent was ¥7.4, marking a decline of ¥67.99 from the year-ago figure. Revenues increased 3.4% year over year to ¥4.05 trillion. This rise can be attributed to higher sales revenues at automobile and financial services businesses.

Consolidated cash and cash equivalents were ¥2.49 trillion as of Mar 31, 2019, up from ¥2.26 trillion as of Mar 31, 2018. As of Mar 31, 2019, Honda’s net cash from operating activities amounted to ¥776 billion compared with the year-ago ¥987.7 billion. The stock has lost 6.63% since the earnings release (as of May 16).

On May 8, Toyota Motor Corporation’s (TM - Free Report) earnings were $2.89 per ADR in fourth-quarter fiscal 2019 (ended Mar 31, 2019). Earnings missed the consensus estimate of $3.91. This Japan-based automaker reported net income of ¥459.5 billion ($4.2 billion) in the quarter under review, down from ¥481 billion ($4.5 billion) in the year-ago quarter. Total revenues rose to $70 billion (¥7.75 trillion) from the year-ago figure of $69 billion (¥7.58 trillion). The figure surpassed the Zacks Consensus Estimate of $69.9 billion.

Toyota had cash and cash equivalents of ¥3.7 trillion ($33.3 billion) as of Mar 31, 2019, compared with ¥3.1 trillion ($28 billion) as of Mar 31, 2018. The stock has lost 1.5% since the earnings release (as of May 16).

Automobile ETFs in Focus

In the current scenario, it is prudent to discuss the following ETFs that have relatively high exposure to the companies discussed.

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

The fund tracks the NASDAQ OMX Global Auto Index. It comprises 35 holdings with the above-mentioned companies carrying 28.88% weight. Its AUM is $19.7 million and expense ratio is 0.70%. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Full-Blown Trade Spat: 5 Most-Vulnerable Sector ETFs & Stocks).

WBI Power Factor High Dividend ETF (WBIY - Free Report)

The fund tracks the Solactive Power Factor High Dividend Index. It comprises 51 holdings with 5.48% weight to Ford Motor Co. Its AUM is $117.2 million and expense ratio is 0.70% (read: Buyback or Dividend: Which ETF Wins YTD & What Lies Ahead?).

Invesco BLDRS Asia 50 ADR Index Fund (ADRA - Free Report)

The fund tracks the S&P/BNY Mellon Asia 50 ADR Index. It comprises 51 holdings with 9.94% weightage to Toyota Motor Corp and 2.88% weight to Honda Motor Co., Ltd. Its AUM is $18.4 million and expense ratio is 0.30% (read: ETFs to Tap on Alibaba's Revenue Growth in Q4).

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