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Auto Stock Roundup: CNH Industrial's Spin-Off, Ford Recalls & More

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Following a rough first half of the year, U.S. light-vehicle sales increased y/y for the second straight month in August, helped by five sales weekends due to the Labor Day holiday. Total sales of U.S. light vehicles in August came in at 921,567, marking 12.2% y/y growth. Notably, auto biggies like Honda Motors (HMC - Free Report) , Toyota Motors (TM - Free Report) , Hyundai and Nissan drove the sales, registering maximum gains.

On the news front, CNH Industrial (CNHI - Free Report) unveiled plans to separate the IVECO truck business from the agriculture and construction business, thereby creating two distinct world-leading businesses. Meanwhile, Ford (F - Free Report) recalled more than 550,000 trucks and SUVs in North America to resolve the vehicles' seat-back issue.

Recap of the Week’s Most Important Stories

1.    As part of the five-year plan to boost profits, CNH Industrialis set to separate the IVECO truck business from the agriculture and construction business, thereby creating two distinct world-leading businesses. Subject to certain precedent conditions, the industrial vehicle maker intends to complete the revamp by 2021, forming two independent publicly-listed companies in a bid to rev up asset values and optimize portfolio. The strategic spin-off holds the promise of unlocking significant value by maximizing focus, optimizing costs and delivering synergies.

Following a comprehensive portfolio review, CNH Industrial will split its business into two units — ‘On Highway’ and ‘Off-Highway’ businesses. The ‘Off-Highway’ assets, which contributed around $15.6 billion to 2018 pro-forma combined revenues, will comprise agricultural and construction business along with specialty vehicles. The ‘On-Highway’ assets, which represented 2018 pro-forma combined revenues of around $13.1 billion, will include the Iveco brand and powertrain business. (Read More: CNH Industrial's Spin-Off of IVECO Truck Unit to Unlock Value). CNH Industrial currently carries a Zacks Rank #3 (Hold).

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

2.   Ford has recalled more than 550,000 trucks and SUVs in North America to resolve an issue the vehicles' seat-back issue. Per the company, the third pawl required for seat-back strength may be missing from these vehicles. In case of a crash, this poorly-assembled recliner mechanism might be unable to restrain the passenger adequately, thus escalating the risk of injury. Nevertheless, Ford has stated that it is unaware of any crashes or injuries. The company’s latest action will affect 483,325 vehicles in the United States and the federal territories, 58,712 in Canada, and 8,149 in Mexico.

The affected vehicles include Ford F-150 from 2018-2020 models, Ford F-Series Super Duty trucks and Expedition vehicles from 2019 and 2020 models, and Explorer SUVs from 2018 through 2019. The safety recall also includes some 2020 Ford Explorer and Lincoln Aviator vehicles with rear seats, along with manual seat-back recliner mechanisms. (Read More: Ford Recalls 550K Vehicles to Resolve Seat-Back Issue)

3.   It seems that Elon Musk’s charisma during his recent two-day tour to China has paid off well, as Tesla, Inc. (TSLA - Free Report) won exemption from 10% purchase tax on vehicle sales in China. Reportedly, the tax break was announced the same day Tesla’s enigmatic leader Musk met Chinese Transport Minister Li Xiaopeng. The tax reprieve to one of America’s high-profile company comes as a pleasant surprise amid the escalating U.S.-Sino trade war tiff.

The exemption is intended to benefit electric cars, primarily those manufactured in China. According to CNN Business, 34 carmakers were on the exemption list. This mainly applies to cars made by joint ventures between Chinese and foreign firms. The only foreign manufacturer that was granted an exemption on its own was Tesla. The tax break will lower the price that customers have to pay for Model 3, Model S or Model X Tesla cars. On an average, the exemption will reduce the cost of buying new Tesla car by 99,000 yuan. (Read More: Tesla Wins 10% Tax Exemption on China's Vehicle Sales)

4.    Copart, Inc. (CPRT - Free Report) reported adjusted earnings per share of 60 cents in fourth-quarter fiscal 2019 (ended Jul 31, 2019), surpassing the Zacks Consensus Estimate of 57 cents. The bottom-line figure also surged 42.8% year over year. Including one-time items, earnings per share came in at 64 cents in the July-end quarter, up from the 45 cents in the comparable period last year.Net income was $153.5 million, reflecting an increase of 39.9% from fourth-quarter fiscal 2018.

For fiscal 2019, Copart reported adjusted earnings per share of $2.25, up from the prior-year figure of $1.73. Earnings also beat the Zacks Consensus Estimate of $2.21. In fiscal 2019, revenues came in at $2 billion, up from the fiscal 2018 figure of $1.8 billion and in line with the Zacks Consensus Estimate. (Read More: Copart Q4 Earnings & Revenues Top Estimates, Up Y/Y)

5. Navistar International Corp. (NAV - Free Report) recorded net income of $156 million or $1.56 per share in third-quarter fiscal 2019 (ended Jul 31, 2019), compared with $170 million or $1.71 per share in the prior-year quarter. Adjusted earnings per share for the reported quarter were $1.47, which surpassed the Zacks Consensus Estimate of $1.12.

The company generated $3.04 billion in revenues, which beat the Zacks Consensus Estimate of $2.9 billion. The figure also marks a roughly 17% rise from the third quarter of fiscal 2018. The year-over-year improvement was driven by strong volumes gains in Class 6-8 trucks and buses in the United States and Canada, the company’s core markets. (Read More: Navistar Beats Earnings and Revenue Estimates in Q3)

 

Price Performance

Company

Last Week

Last 6 Months

GM

3.6%

-1.1%

F

0.9%

7.2%

TSLA

-0.5%

-20.1%

TM

1.2%

12%

HMC

3.6%

-12%

HOG

0.2%

-17.5%

AAP

2.8%

-10.2%

AZO

0.8%

20%

 

In the past week, all the stocks except Tesla have gained, with General Motors and Honda being the maximum gainers.

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

What’s Next in the Auto Space?

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

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