UK markets closed

Auto Stock Roundup: TSLA's Stellar Q4 Show, BWA-Delphi Deal & More

Zacks Equity Research

This week, the fourth-quarter earnings season for the Auto sector kicked off on an optimistic note. Harley-Davidson and PACCAR, both of which are S&P sector components, came up with better-than-expected earnings. Premier EV maker Tesla also unveiled quarterly numbers yesterday, surpassing both earnings and revenue estimates. Tesla currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, BorgWarner made huge headlines by inking a $3.3-billion acquisition deal with Delphi Technologies. Per Bloomberg, this deal is BorgWarner’s biggest acquisition to date, beating its purchase of Remy International Inc. for about $950 million in 2015.

(Read the Last Auto Stock Roundup here).

Recap of the Week’s Most Important Stories

1. Tesla, Inc. TSLA reported earnings per share of $2.14 in fourth-quarter 2019, beating the Zacks Consensus Estimate of $1.62 and increasing from the year-ago figure of $1.93. The outperformance stemmed from higher-than-expected automotive revenues totalling $6.37 billion, which outpaced the consensus mark of $5.96 billion. Energy generation and storage revenues increased from $372 million in fourth-quarter 2018 to $436 million in the reported quarter. Services and other revenues were up 9.23% year over year to $580 million.In fourth-quarter 2019, Tesla reported Model 3 production and deliveries of 86,958 and 92,620 units, reflecting year-over-year increase from 61,394 and 63,359 units, respectively.For full-year 2020, the company expects vehicle deliveries to exceed 500,000 units. (Read more: Tesla's Q4 Earnings & Revenues Beat Estimates, Up Y/Y)

2. Harley-Davidson HOG reported earnings per share of 22 cents in fourth-quarter 2019, surpassing the Zacks Consensus Estimate of 5 cents and increasing from 17 cents in the prior-year period. This outperformance resulted from higher-than-expected motorcycle sales in the Asia Pacific region. Total revenues from Motorcycle and Related products, which form bulk of overall revenues of the firm, declined 8.5% year over year to $874.1 million in the reported quarter. The top line also missed the Zacks Consensus Estimate of $930 million.For full-year 2020, Harley-Davidson projects Motorcycle segment revenues in the band of $4.53-$4.66 billion. The motorcycles segment operating margin, as a percentage of revenues, is expected in the band of 7-8% for the full year.Capex is projected between $215 million and $235 million. (Read more: Harley-Davidson Q4 Earnings Top, Sales Lag Estimates)

3. PACCAR PCAR reported earnings of $1.53 per share in fourth-quarter 2019, beating the Zacks Consensus Estimate of $1.50, mainly aided by higher income and revenues from the company’s parts unit. However, the reported figure was lower than the prior-year quarter’s $1.65 per share. Consolidated revenues (including trucks and financial services) came in at $6.12 billion, outpacing the Zacks Consensus Estimate of $5.55 billion. The top line, however, declined from the year-ago quarter’s $6.28 billion. For 2020, capital expenditures are projected within $625-$675 million, and research and development expenses are estimated in the $310-$340 million band. (Read more: PACCAR Q4 Earnings & Revenues Top Estimates, Down Y/Y)

4. BorgWarner Inc. BWA announced that it will acquire Delphi Technologies in an all-stock deal, bringing together two auto suppliers preparing for transformational shift to hybrid and electric vehicles in the industry. The deal values Delphi at about $3.3 billion, including debt.The deal is scheduled to close in second-half 2020, subject to satisfactory closing conditions and regulatory approvals.Delphi’s buyout will fortify BorgWarner's combustion, commercial vehicle and aftermarket businesses, which are focused on clean technologies in order to increase efficiency and performance of modern combustion vehicles.By 2023, BorgWarner expects run-rate cost synergies of $125 million and aims at strengthening the power electronics division. (Read more: BorgWarner to Boost Propulsion System on $3.3B Delphi Buyout)

5. General Motors GM announced plans to make an investment of $3 billion to produce all-electric trucks, SUVs and autonomous vehicles, in turn generating more than 2,200 jobs. It aims to spend $2.2 billion at the Detroit-Hamtramck assembly plant in order to produce all-electric vehicles, while the remaining $800 million will be used in supplier tooling and other projects related to the launch of the electric trucks. General Motors’ first all-electric truck will be a Hummer pick-up, with production scheduled to begin in late 2021, followed by the Cruise Origin electric self-driving vehicle. The automaker is focused on electric and autonomous vehicle development, in a bid to adapt to changing dynamics and customer preferences. (Read more:General Motors to Invest $3B to Produce All-Electric Vehicles)

Price Performance

Company

Last Week

Last 6 Months

GM

-3.7%

-16.7%

F

-3.1%

-7.1%

TSLA

1.5%

140.4%

TM

-1.1%

9.7%

HMC

-3.2%

6.7%

HOG

-4.1%

-5.5%

AAP

-7.5%

-8%

AZO

-6%

-2.4%

 

The following table shows the price movement of some of the major auto players over the past week and six-month period.

In the past week, Tesla has been the only gainer. Even in the past six months, Tesla has skyrocketed 140.7%, while General Motors has recorded the maximum decline of 16.7%.

What’s Next in the Auto Space?

Car enthusiasts will be keeping a close watch on January 2020 U.S. car sales, which will be coming out early next week. Investors in the auto sector would be closely tracking the monthly sales reports of auto biggies like Honda Motor HMC, Hyundai and Toyota Motor TM, among many others.

Investors will also be keenly awaiting fourth-quarter 2019 earnings reports of a host of auto companies including Detroit 3 carmakers General Motors, Ford F and Fiat Chrysler FCAU that are scheduled to release next week.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PACCAR Inc. (PCAR) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Ford Motor Company (F) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
BorgWarner Inc. (BWA) : Free Stock Analysis Report
 
Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.