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Auto Stock Roundup: FCAU, TM, NSANY Record Sales Growth in May, GM Upgrades Plant

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In the recently reported U.S. auto sales for May 2019, many major automakers have observed a rise in vehicle sales after a dry spell since the beginning of 2019. Last month, industry players — including Fiat Chrysler Automobiles N.V. (FCAU - Free Report) , Toyota Motor Corporation (TM - Free Report) and Nissan Motor Co. (NSANY - Free Report) — posted sales gain compared with the same month of 2018. General Motors Company (GM - Free Report) no longer announces monthly sales numbers. However, per the data center of Automotive News, General Motors sold 260,300 cars and light trucks in May compared with 263,500 a year ago.

In the past week, General Motors has announced that it is upgrading the Fort Wayne assembly hub to increase production of the new Chevrolet Silverado 1500 and GMC Sierra 1500 pickup trucks. With the rising demand for SUVs and pickup trucks, automakers are widening their product line, and flooding the market with enhanced and spacious vehicles.

Navistar International Corporation (NAV - Free Report) reported second-quarter fiscal 2019 results. Its earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year. This year-over-year improvement was driven by strong performance of the company’s Class 6-8 trucks and buses in the United States and Canada market.

Recap of the Week’s Most Important Stories

1.    To the delight of its shareholders, O'Reilly Automotive, Inc.’s (ORLY - Free Report) board approved an increase in the share repurchase authorization program by an additional $1 billion. This raised the aggregate authorization under the program to $12.75 billion.

O’Reilly is a leading specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The company sells products to Do-it-Yourself (DIY) customers and Do-it-for-Me (DIFM) or professional installers. Strong cash flow aids O’Reilly to pursue an aggressive share-repurchase policy, which continues to boost earnings per share. In the first quarter of 2019, the company repurchased 0.9 million shares for $322 million. In 2018, it bought back 6.1 million shares for $1.71 billion.

The additional $1-billion authorization is effective for a three-year period, beginning May 31, 2019.  In first-quarter 2019, O’Reilly’s adjusted earnings per share were $4.05, marking 12% rise from $3.61 in the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of $4.06. (Read more: O'Reilly Approves Additional $1B Repurchase Authorization)

O’Reilly currently carries a Zacks Rank #3 (Hold).  

2.    Cummins Inc. (CMI - Free Report) entered a partnership with Isuzu Motors Limited to evaluate and develop new diesel and diesel-based powertrains. The Isuzu Cummins Powertrain Partnership agreement is a formal business structure, under which the companies will leverage their combined technical strength to develop powertrains for customers across the globe. In 2018, the companies signed a Letter of Intent to assess opportunities on the power-source business.

Cummins and Isuzu committed to form a coalition board and dedicate skilled workforce to explore possible prospects in product development, procurement and manufacturing of powertrains. The collaboration will aid the companies to combine their strengths and expand the product portfolios.

The alliance believes that diesel engines will continue to be a vital choice for commercial vehicles and industrial applications. The widening portfolio with diesel-related products is expected to drive global growth for Cummins and Isuzu.

Apart from launching products, Cummins partners with companies to witness high returns. Apart from Isuzu, the company collaborated with Hyundai to develop an electric powered mini excavator. (Read more: Cummins to Develop Diesel-Based Powertrains With Isuzu)

Cummins currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3.    General Motors announced that it is upgrading its Fort Wayne, IN-based assembly plant for increasing production of Chevrolet Silverado 1500 and GMC Sierra 1500 pickup trucks. The U.S. automaker will invest $24 million to upgrade the facility.

The investment will add conveyors and other tools in the assembly plant required to increase production. Adding the latest investment announcement, General Motors has invested in excess of $1.2 billion to develop the facility for vehicle production since 2015.

With unending demand for SUVs and pickup trucks, automakers are widening their product line, and flooding the market with enhanced and spacious vehicles. Although the demand for such large vehicles declined over the last few months, automakers expect the demand to regain traction. Robust demand for large vehicles is likely to drive the industry players’ top line, which otherwise are making loss, resulting from the drop in traditional passenger car sales.

Launched in the second half of 2018, Chevrolet Silverado 1500 and GMC Sierra 1500 crew cab pickup trucks were among the top revenue contributors for General Motors in the first quarter of 2019. The company projects to witness a similar performance by the pickup models in the second quarter. (Read more: General Motors Announces $24M Investment for Hub Development)

General Motors currently carries a Zacks Rank #3.

4.    Navistar reported adjusted earnings per share of $1.06 in second-quarter fiscal 2019 (ended Apr 30, 2019), which surpassed the Zacks Consensus Estimate of 88 cents. The company reported earnings of 55 cents per share in the prior-year quarter.

During the reported quarter, Navistar recorded net loss of $48 million against net income of $55 million in the prior-year quarter.

The company generated $3 billion in revenues, which beat the Zacks Consensus Estimate of $2.7 billion. The figure also marks a 24% rise from the second quarter of fiscal 2018. The year-over-year improvement was driven by strong performance of Navistar’s Class 6-8 trucks and buses in the United States and Canada markets.

During the reported quarter, net sales and revenues at Navistar’s Truck segment were $2.3 billion, up 35% from the prior-year quarter figure. The segment recorded net loss of $74 million against net profit of $42 million in the year-ago quarter. This decline resulted from charges related to MaxxForce Engine EGR class action settlement, higher volume and improved pricing.

Net sales and revenues at Navistar’s Parts segment were $579 million, down 4% from the same period of the last fiscal year. The segment’s profit was $144 million, up 9% on a year-over-year basis. Results were aided by higher U.S. margins and lower inter-company access fees, partly offset by lower BDP volume.

Net sales and revenues at the company’s Global Operations declined 10% year over year to $87 million. Its profit was $3 million compared with $1 million recorded in the second quarter of fiscal 2018.

Net sales and revenues at Navistar’s Financial Services segment rose 24% year over year to $78 million. It recorded profit of $32 million compared with $13 million recorded in the prior-year quarter. The segment’s profit improved, owing to higher finance receivable balances in the United States and higher operating lease balances in the United States and Mexico.

Navistar currently carries a Zacks Rank #3

5.    Lithia Motors, Inc. (LAD - Free Report) made the announcement of adding Ford Lincoln of Morgantown, WV. This is the first dealership addition by the Medford, OR-based Lithia Motors in West Virginia.

The company is one of the leading automotive retailers of new and used vehicles and related services in the United States. The market for purchasing dealerships is growing fast. The company continuously strives to make acquisitions for increasing its market share and to cater to customer requirements in a better way.

The acquisition of Morgantown auto dealership is the latest instance of Lithia Motors’ successful strategy of acquiring stores with robust potential to generate higher returns. Importantly, the company’s revenues grew 17.2% in 2018 and its position increased by 29 spots on the Fortune 500 list to 265.

Ford Lincoln of Morgantown is similar to Lithia Motors’ other stores located in exclusive markets. The excellent team of Ford Lincoln of Morgantown and strong resources of Lithia Motors are likely to aid the companies.
Lithia Motors currently sports a Zacks Rank #1

Performance

In the past week, all the stocks, except for Advance Auto Parts, Inc. (AAP - Free Report) increased. AutoZone, Inc. (AZO - Free Report) rose the most.

In the past six months, Tesla, Inc. (TSLA - Free Report) has declined the most while AutoZone recorded maximum gain.

CompanyLast WeekLast 6 Months
GM3%3.3%
F0.7%10.8%
TSLA3.5%-45.1%
TM0.6%0.2%
HMC1.9%-4.7%
HOG3.3%-10.2%
AAP-0.8%-7.7%
AZO4%22.8%


What’s Next in the Auto Space?

Watch out for the usual news releases over the next week.

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