Auto Stocks to Watch for Earnings on Jan 31: PCAR, HOG, CNHI

The auto sector entered the Q4 earnings season with weaker-than-expected earnings report by Ford Motor Co. F. The sector is expected to record weak performance this earnings season. As of Jan 27, nearly 10% of the sector’s companies had reported results. These companies recorded 47.5% year-over-year fall in earnings and 5% decline in revenues, per our latest Earnings Preview. In comparison, the 170 S&P 500 companies that had reported through Jan 27 posted a 6% growth in earnings and a 3.1% rise in revenues.

By the end of Q4, auto sector earnings are projected to decline 25.8%, while revenues are expected to inch up 0.2%. Meanwhile, total S&P 500 earnings and revenues are expected to increase 5.2% and 4% year over year, respectively.

Safety recalls and related costs have turned out to be a major issue for most automakers. Recall-related repair costs have increased their financial burden. The pressure to maintain attractive incentives and deals to boost volumes is also straining their margins and bottom line. Further, the adverse impact of foreign currency translation remains a headwind for many companies.

Meanwhile, strong sales growth in the key markets of U.S., China and Europe has been the primary driving factor for the auto sector in Q4. Also, low fuel prices helped the sales of higher margin vehicle segments, such as SUVs and light trucks. With these factors in mind, let’s see what awaits these three auto stocks that are slated to release their results on Jan 31.

PACCAR Inc. PCAR has an Earnings ESP of +1.15% because the Most Accurate estimate is pegged at 88 cents while the Zacks Consensus Estimate stands at 87 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company managed to beat earnings in two of the trailing four quarters and missed in the other two, thus delivering a positive average surprise of 0.32% over this period. Ford carries a Zacks Rank #3 (Hold) (read more: PACCAR Q4 Earnings: Is a Surprise in the Cards?).

Harley-Davidson, Inc. HOG has an Earnings ESP of 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 31 cents. It posted positive earnings surprises in each of the last four quarters, with a positive average surprise of 6.24%. Harley-Davidson carries a Zacks Rank #4 (Sell) (read more: Harley-Davidson: Will It Disappoint in Q4 Earnings?).

CNH Industrial N.V. CNHI currently has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are both 11 cents. CNH posted positive earnings surprises in two of the trailing four quarters. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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