Yahoo Finance Auto Stock Roundup: GM Raises '21 EBIT View, LAD Boosts Buyback & More
Last week, a few auto biggies released their vehicle sales data for the month of November. Apart from Ford F, all auto giants that released monthly sales data witnessed a year-over-year decline in sales volumes. While the demand for vehicles remained high, limited vehicle supply amid chip crunch and high prices owing to tight inventories kept a lid on sales volumes. (US Auto Sales Stuck in Low Gear, Holiday Sales Push Unlikely)
Meanwhile, Ford and Honda HMC issued recalls over rear brake defects and faulty hood, respectively. General Motors GM grabbed headlines as it lifted full-year 2021 profit projections. CNH Industrial CNHI enriched its portfolio with the NX9 buyout. Auto retailer Lithia Motors LAD also made it to the week’s major news as it boosted the stock repurchase program.
Last Week’s Top Stories
1. General Motors raised its full-year 2021 EBIT forecast. The U.S. auto giant now envisions pretax profit to total $14 billion, higher than the previous guided range of $11.5-13.5 billion. High demand for vehicles amid preference for personal mobility and robust consumer spending is expected to aid General Motors’ results. The rising prices of new vehicles amid tight inventories due to the global chip crunch will likely buoy profits.
While shares of GM rose post the announcement of revised profit forecasts, near-term headwinds surrounding the firm are far from over. General Motors’ CFO Paul Jacobson notified that the company continues to reel under the shortage of semiconductor supply and low production and is not likely to operate at a full run rate by the end of next year. It expects the chip crisis to continue at least till first-half 2022 and cautioned that vehicle production and inventories won't get back to normal until late 2022.
General Motors carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2. Lithia Motors announced the decision to boost the stock buyback program by $750 million. This brings the auto retailer’s total funds available for repurchase to $885 million. Robust earnings and strong free cash flow generation have enabled the company to engage in this investor-friendly move of returning capital to shareholders through share repurchases, thereby driving shareholders’ confidence.
Meanwhile, Driveway Finance Corporation completed its inaugural issuance of securities backed by its originated auto loan portfolio. For years, Driveway Finance has been the primary lender for Lithia and Lithia-owned dealer groups. This asset-backed securities offering has raised $344 million of additional funds to sponsor Lithia’s rapid growth and network development. Driveway Finance originations currently represent approximately 5% of LAD's overall business and are expected to escalate to 15% in the near future.
3. CNH Industrial announced the acquisition of NX9 — a software engineering company with expertise in ISOBUS technology — in a bid to rev up digital innovation in the agricultural unit. The financial details of the deal are still under wraps. This buyout builds upon CNH Industrial’s strategic efforts to develop more state-of-the-art products in the precision agriculture space and help agricultural customers realize the true capabilities of their operations.
The takeover will consolidate ISOBUS core technologies and applications across the entire electric vehicle architecture of CNH Industrial’s core agriculture product portfolio. Further, it will help the Italian-American vehicle maker leverage the NX9 team’s expertise, thereby serving customers and dealers more effectively. The deal will help unlock new acquisition opportunities for CNH Industrial, allowing it to expand the business further.
4. Ford announced the decision to recall 114,996 2021-2022 Bronco Sport and Escape SUVs in the United States over faulty rear-brake linings that could result in a potential reduction in the vehicles' power brake performance. The cause of the defect is a friction coefficient in the rear-brake linings that is beyond the specified tolerance. This might result in drivers experiencing varied braking performance, increasing stopping distances beyond regulated standards, thereby raising the risk of a crash.
Ford is still confirming the total number of affected vehicles which is subject to change as the auto biggie continues to investigate the defect. Currently, the recall includes 65,429 of the 2021 Bronco Sport and 12 2022 models as well as 49,553 2021 Escapes and two from 2022. There is no fix for the problem yet, so the automaker will start intimating customers from Jan 10, 2022, to bring in their vehicles for a repair.
5. Honda issued a recall for more than 724,000 cars over a safety issue with the vehicles’ hoods. The affected vehicles include certain 2016-2019 Pilot and 2019 Passport SUVs along with a few 2017-2020 Ridgeline pickup trucks. Reportedly, the recalled vehicles had gaps in the front seal between the hood and grill, allowing air entry, resulting in hood vibration at highway speeds. Over time, the hood vibration could damage the hood latch striker, resulting in the separation of the hood latch striker from the hood, making the hood pop open.
There are no reported crashes or injuries due to the issue. Honda will notify owners of the affected vehicles via letters starting Jan 17, 2022. Dealers will replace either the hood or the hood latch striker, free of cost, to resolve the issue.
Price Performance
The following table shows the price movement of some of the major auto players over the past week and six-month period.
Image Source: Zacks Investment Research
What’s Next in the Auto Space?
Industry watchers will track China vehicle sales data for November 2021, which will likely be released by the China Association of Automobile Manufacturers later this week.
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Ford Motor Company (F) : Free Stock Analysis Report
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
CNH Industrial N.V. (CNHI) : Free Stock Analysis Report
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