The performance of major auto stocks remained sluggish in the last five trading sessions, given the overall weakness in the market, along with lackluster earnings, more recalls and sporadic negative news. A few positive developments such as General Motors Co.’s (GM) expectations of higher China sales compared with last year and Tesla Motors, Inc.’s (TSLA) new software update for Model S failed to revive the stocks.
In fact, Tesla, which recorded massive gains in 2013 and earlier this year, fell for the third consecutive week, as this week a JPMorgan Chase & Co. (JPM) analyst gave expectations of a lesser number of car deliveries by the company over the next few years than its target. The analyst also set a target price of $190 for Dec 2015, which is significantly lower than the current share price. The prior two weeks were hurt by negative comments from CEO Elon Musk and a Morgan Stanley (MS) analyst regarding the high stock price.
(Read last to last week’s recap here: Auto Stock Roundup: Tesla Gigafactory Incentives Approved, Ford Reports Europe Sales, GM Ignition Switch Death Toll)
Recap of the Week’s Most Important Stories
1. A few companies in the auto sector reported earnings this week. AutoZone Inc. (AZO) reported a 15.6% rise in earnings per share (EPS) (adjusted for 1 extra week last year) to $11.28 for the fourth quarter of fiscal 2014 (ended Aug 30, 2014) from $9.76 in the year-ago quarter. EPS surpassed the Zacks Consensus Estimate of $11.23. Quarterly revenues (adjusted) increased 4.5% year over year to $3 billion but missed the Zacks Consensus Estimate of $3.06 billion. (Read more: AutoZone Beats Q4 Earnings on Higher Revenues, Margins.)
Meanwhile, CarMax Inc. (KMX) posted EPS of 64 cents in the second quarter of fiscal 2015 (ended Aug 31, 2014), marking an increase of 3.2% from 62 cents a year ago. However, EPS missed the Zacks Consensus Estimate of 67 cents. Net sales and operating revenues in the quarter rose 10.9% year over year to $3.60 billion, exceeding the Zacks Consensus Estimate of $3.55 billion. (Read more: CarMax Q2 Earnings, Revenues Grow Y/Y on Higher Sales.)
Copart, Inc. (CPRT) reported EPS of 39 cents for fourth-quarter fiscal 2014 (ended Jul 31, 2014), up from 32 cents in the corresponding quarter last year. However, EPS fell short of the Zacks Consensus Estimate of 41 cents. Copart’s revenues rose 9% to $287.5 million in the quarter but missed the Zacks Consensus Estimate of $289 million.
2. General Motors announced that it will establish its Cadillac brand as a separate business unit. The automaker also revealed plans to open Cadillac’s new global headquarter in New York in 2015. (Read more: General Motors to Create a Separate Cadillac Business Unit.)
Further, the President of General Motors’ China unit revealed that sales in the nation this year are expected to surpass last year’s sales of 3.1 million vehicles. Moreover, sales of the Cadillac unit should be close to 70,000 vehicles.
3. Tesla announced the launch of v6.0 software as an over-the-air update for Model S vehicles. The software launches traffic-based navigation and travel advice, provides an in-car view of daily schedules, enables location-based air suspension settings, and allows owners to name their vehicles and start it remotely using smart phones. It is also incorporated with new features like hill start assist, smart suspension controls and energy saving sleep mode. (Read more: Tesla's Latest v6.0 Software to Enhance Model S Features.)
4. Ford Motor Co. (F) is planning to reduce the production of the Fiesta hatchback in Europe due to plummeting demand in some key markets in the continent, according to media reports. Consequently, the automaker will stop the assembly of the car at its Cologne, Germany plant for 11 days in October and November. The Cologne plant is Ford’s main assembly plant in Europe for the Fiesta, which is its highest selling car in the continent. (Read more: Ford to Cut Fiesta Production in Europe on Low Demand.)
5. General Motors, Honda Motor Co., Ltd. (HMC) and Toyota Motor Corp. (TM) announced new recalls in the last 7 days. General Motors announced two recalls, one for 221,558 Cadillac XTS and Chevrolet Impala vehicles that have a glitch in the parking brake (read more: General Motors Shares Fall on Parking Brake Recall.) and the other for 3,200 vans with a gas leak risk (read more: General Motors Recalls 3,200 Vans on Gas Leak Concerns.).
Toyota declared a global recall of 20,000 vehicles equipped with its 2GR-FE V-6 engines that may have improper welding which can lead to fuel leakage and fire. (Read more: Toyota Recalls 20K Vehicles for Improper Fuel Pipe Welding.)
Honda announced the recall of 6,200 model-year 2015 Fit vehicles sold in the U.S., which may be fitted with A-pillar interior cover designed for vehicles sold in other markets. This may affect the deployment of the side curtain airbag, which raises the risk of injury in case of a crash.
Performance
Most auto stocks incurred losses over the last 5 trading sessions. AutoZone, which had gained the most in the previous 5 trading sessions, lost the most in the last one-week period as its earnings failed to meet expectations. Honda, with merely 2.45% gain, was leading due to the weak performance of the other stocks.
The performance of these stocks over the last six months was better. While bellwether Tesla was leading with an impressive 14.38% gain, Harley-Davidson, Inc. (HOG) lost the maximum in the six-month period.
|
Company |
Last 1-Week Period |
Last 6 Months |
|
GM |
-0.59% |
-2.49% |
|
F |
-0.73% |
+7.05% |
|
TSLA |
-3.54% |
+14.38% |
|
TM |
+1.28% |
+9.58% |
|
HMC |
+2.45% |
+0.32% |
|
HOG |
-2.23% |
-8.16% |
|
AAP |
-2.79% |
+5.71% |
|
AZO |
-5.23% |
-3.83% |
What’s Next in the Auto World?
Thor Industries Inc. (THO) is set to report its financial results for the fourth quarter and full year ended Jul 31, 2014 later today. Tomorrow, Harley-Davidson will pay a cash dividend of 27.5 cents per share for the third quarter of 2014 to shareholders of record as of Sep 16, 2014. On Sep 29, Ford will host an Investor Day conference.
Further, all major automakers are expected to report their U.S. auto sales for September on Oct 1. Toyota will unveil its C-HR Concept crossover vehicle at the 2014 Paris Motor Show on Oct 2.
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