Auto Roundup: Thor's Impressive Q4 Earnings, KMX's Dismal Q2 Results and More

Last week, there were a couple of earnings releases. Recreational vehicle (RV) maker Thor Industries THO put up an impressive show, delivering a comprehensive beat for fourth-quarter fiscal 2022 (ended Jul 31, 2022). This marked the 10^th straight earnings beat for Thor. On the other hand, used vehicle retailer CarMax KMX came out with lackluster second-quarter fiscal 2023 results, missing both earnings and revenues estimates.

Meanwhile, in a buildup to the 2014 rollover accident that killed the Hill couple from Georgia, Ford F appealed to a court in the country for a new trial, after a jury came out with a verdict against it. In August, jurors delivered their verdict following a 14-day trial in a state court in Georgia where it ordered the company to pay more than $1.7 billion for the accident. But last week, Ford requested a fresh trial for the case. The case that has been dragging on for years was initially lodged against Ford by the family of Melvin and Voncile Hill, the persons killed. The couple was driving a 2002 Ford F-250 Super Duty truck from their farm in Georgia when the right front tire ruptured and the truck rolled over, killing both. The Hill family claimed that Ford had prior knowledge that the roofs of the F-250 pickups were too flimsy to protect riders in the event of a rollover but did not warn consumers of the same until 2016.

German auto giant Volkswagen VWAGY and Belgian materials firm Umicore formed a joint venture (JV) earlier last week in a bid to boost electric vehicle (EV) batteries in Europe. Volkswagen is driving efforts toward a rapid transition to all-electric vehicles. Its Accelerate strategy, launched in August, projects that by 2030 the auto magnate will generate 70% of its sales in Europe from all-electric vehicles. The company also projects 100% of its new vehicles in major markets to be carbon-free by 2040. These targets are part of Volkswagen’s broader goal to be fully carbon neutral by 2050. Separately, the carmaker plans to build six battery factories in Europe, targeting a 240 GWh capacity by 2030.

Finally, Stellantis STLA also made the headlines as collaborated with Uber to transform the latter’s vehicle rental fleet to an electric one in France. The move underlines STLA’s Dare Forward plan. In March this year, it launched the Dare Forward 2030 plan to aid its transition to a net-zero carbon entity by 2038, with a 50% reduction by 2030. The auto giant aims to double net revenues to $335 billion annually by 2030 and maintain double-digit profit margins as it looks to ramp up efforts to bring electrified versions of its cars. Through the partnership with Uber, Free2Move underlines Stellantis’ vision to halve its carbon emissions.

Last Week’s Top Stories

Thor posted fourth-quarter fiscal 2022 adjusted earnings of $5.15 per share, which comfortably surpassed the Zacks Consensus Estimate of $4.13. This outperformance can be largely attributed to higher-than-anticipated revenues and gross profits from the North American Motorized RVs segment. The bottom line rose 25% from the year-ago profit of $4.12 per share. The company registered revenues of $3,821.7 million for the quarter under review, topping the Zacks Consensus Estimate of $3,792 million. The top line also increased 6.4% year over year.

As of Jul 31, 2022, Thor had cash and cash equivalents of $311.7 million and long-term debt of $1,754.2 million. During the fiscal fourth quarter, the company boosted buyback by $450 million, raising the total authorization to approximately $700 million. During fiscal 2022, THO repurchased $165.1 million of common stock.

CarMax reported second-quarter fiscal 2023 (ended Aug 31, 2022) net earnings per share of 79 cents, lagging the Zacks Consensus Estimate of $1.40 amid lower-than-anticipated revenues across all segments. The bottom line also fell from $1.72 per share recorded in the year-ago period. Our estimate for the EPS was $1.43. The auto retailer registered revenues of $8,145 million for the August-end quarter, which fell short of the Zacks Consensus Estimate of $8,749 million. The top line, however, recorded a 2% year-over-year increase. Our estimate for the top line was $8759.6 million.

KMX had cash/cash equivalents and long-term debt of $56.7 million and $2,511.5 million, respectively, as of Aug 31, 2022. During the fiscal second quarter, CarMax bought back 1.7 million shares of common stock for $163 million under the share repurchase program. As of Aug 31, 2022, it had $2.45 billion remaining under the share-repurchase authorization. The company opened three new stores during the fiscal second quarter. KMX currently operates more than 230 used car stores. In fiscal 2023, CarMax targets to open 10 stores.

Ford requested a fresh trial for the 2014 rollover accident case. The U.S. auto giant filed two motions in a state court in Georgia. One motion requested a new trial, while the other questioned the correctional damages imposed on it in August. In the fresh court filings, Ford has contended that a state judge unfairly debarred it in 2018 from providing evidence that would have testified to the safety and the quality of the truck involved in the fatal incident.

Ford also alleged in the filings that it was unable to point out other factors that could have played a role in the fatalities, including the likelihood that occupants weren’t properly wearing their seat belts. F’s lawyers had also argued that the load-carrying capacity on the tire installed on the truck was incorrect, which led to the accident. Ford opined that when the tire ruptured, Hill had improperly steered his truck, thus positioning it at a dangerous angle. The plaintiffs’ attorney has said that he would look into the points raised by Ford in the motions but he is of the view that the company does not have a proper defense to present.

Stellantis and Uber announced a collaboration with Free2Move to offer electric vehicles on a rental basis to drivers in France. Uber intends to offer 100% green vehicles (hybrid or electric) by 2025. Free2Move will support Uber in its plans. Free2Move, part of the Stellantis Group, is a mobility tech company created in 2016. The companies have a laudable vision to reduce the environmental impact that the mobility sector has on the environment.

Presently, 25% of vehicles available on Uber in France are of Stellantis’. Through Free2Move, Uber can get access to Stellantis’ EV offerings in Europe, including Jeep’s first all-electric vehicle. To bolster the transition to cleaner vehicles, Free2move is providing access to Stellantis’ diverse range of EVs, namely e2008, ë-C4, Mokka-e, Zafira-e, e-SpaceTourer, e-Traveller, e-Rifter, e-Berlingo, Combo-e Life, Vivaro-e and Citroen eC4 X.

Volkswagen announced that its battery business, PowerCo, is setting up a battery parts JV with Umicore for precursor and cathode material production. The JV is valued at $2.9 billion. Production at the JV is scheduled for 2025 and will supply PowerCo’s Salzgitter factory, reaching an annual capacity of 40 GWh in 2026. Both companies aim to eventually expand the annual production capacity to 160 GWh by the end of the decade, which will be sufficient to power 2.2 million EVs by the same timeframe. The production site has not been confirmed yet, although Umicore’s Poland plant might be the one chosen.Domestic production will make supply chains sustainable amid supply bottlenecks and the continuously soaring costs of battery materials.

Per the agreement, the companies will jointly control the unit and equally share costs, investments, revenues and profits. The venture will give both partners the first-mover advantage in the flourishing e-mobility market in Europe by bolstering the new materials production capabilities. Volkswagen’s move to form closed-loop and regional supply chains is a crucial step in inching closer to its EV targets.

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