The earnings season started on a mixed note for the auto sector as Harley-Davidson, Inc. HOG surpassed earnings and revenue estimates but lowered its shipment guidance for 2015. The market reacted negatively to the release. The lowered guidance along with a year-over-year decline in first-quarter revenues resulted in a 9.8% plunge in the company’s share price on Apr 21.
Meanwhile, Tesla Motors, Inc.’s TSLA shares gained 4.8% yesterday after it was reported that the company will unveil two energy storage batteries on Apr 30. In another positive development, Toyota Motor Corporation TM emerged as the leading automaker in the first quarter after it posted higher global sales than Volkswagen AG VLKAY and General Motors Co. GM. Further, Ford Motor Co. F announced a $2.5 billion investment in Mexico and Honda Motor Co., Ltd. HMC unveiled a new concept vehicle in China.
(Read last week’s recap here: Auto Stock Roundup for Apr 17, 2015.)
Recap of the Week’s Most Important Stories
1. Harley-Davidson reported a 5% year-over-year rise in earnings to $1.27 per share in the first quarter of 2015 from $1.21 in the year-ago quarter. Also, earnings beat the Zacks Consensus Estimate of $1.24. The year-over-year increase came on the back of higher revenues from the Financial Services segment and a significant decline in interest expense. Consolidated revenues declined 3.5% to $1.67 billion but exceeded the Zacks Consensus Estimate of $1.59 billion.
The decline was due to unfavorable foreign currency exchange and lower motorcycle shipments. Harley-Davidson lowered the guidance for the growth rate of motorcycle shipments in 2015 to 2–4% from the previous projection of 4–6%. The company now expects shipments of 276,000–281,000 units this year, down from 282,000–287,000 units expected earlier (read more: Harley-Davidson Beats on Q1 Earnings, Guides Lower).
2. Toyota sold 2.52 million vehicles globally in the first quarter of 2015, down 2% year over year due to weak sales in Japan. Despite the decline, the Japanese automaker managed to surpass Volkswagen (2.49 million vehicles) and General Motors (2.4 million vehicles) to retain its position as the leading automaker. Toyota has held this position since 2012.
3. Tesla is set to unveil two energy storage batteries on Apr 30, one for home use and the other for large installations. The launch was expected as CEO Elon Musk had tweeted last month that the company will roll out a product line at its Hawthorne Design Studio on Apr 30.
Musk, however, had not revealed what kind of product it would be, choosing instead to tease investors by mentioning that it is not a car. This sparked off widespread speculation about what the product may be, although most people had correctly guessed that it would be energy storage batteries as it was known that the company is developing one.
4. Ford announced that it will invest $2.5 billion in two new facilities in Mexico. The first facility will be built in Ford’s Chihuahua Engine Plant and involve an investment of $1.1 billion. This facility will produce new gasoline-powered engines for export to the U.S., Canada, South America and the Asia-Pacific region. Another $200 million will be invested in the expansion of Ford’s current I-4 and Diesel engines production in Chihuahua. These investments will make the Chihuahua Plant the biggest engine plant in Mexico.
In addition, Ford will invest $1.2 billion to build a new transmission plant within the premises of its transmission supplier and longtime partner Getrag in Guanajuato. This will be Ford’s first transmission facility in Mexico and will produce two new automatic transmissions for vehicles to be sold in South America, Europe, the Asia Pacific and North America.
5. Honda’s wholly owned subsidiary in China, Honda Motor (China) Investment Co., Ltd. ('HMCI'), held the global premiere of the Concept D at Auto Shanghai 2015. Concept D is a concept model for a new SUV that is under development exclusively for the China domestic market.
Performance
Performance of auto stocks remained mixed in the last one week. Tesla bounced back from the previous losses to become the largest gainer over the week. As expected, Harley-Davidson was the biggest loser due to the plunge in its share price following the earnings release.
As a result of the sharp decline, the motorcycle company also lost the maximum in the last six months. Meanwhile AutoZone held tight to its position as the biggest gainer over the last six months.
|
Company |
Last 1-Week Period |
Last 6 Months |
|
GM |
+0.6% |
+18.7% |
|
F |
-1.0% |
+12.6% |
|
TSLA |
+5.6% |
-5.1% |
|
TM |
+1.9% |
+26.2% |
|
HMC |
+2.5% |
+12.2% |
|
HOG |
-8.9% |
-9.2% |
|
AAP |
+1.3% |
+9.2% |
|
AZO |
-0.1% |
+32.9% |
What’s Next in the Auto Space?
A number of major auto companies are set to report their first-quarter earnings next week. The prominent ones include General Motors, Ford, Penske Automotive PAG, Honda and Lear Corp. LEA.
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