Auto Stock Roundup: GM, Ford Beat Earnings, Honda Misses

Earnings dominated the headlines for most auto stock in the last one-week period, with the third-quarter earnings season reaching midway. Major automakers like Ford Motor Co. (F), General Motors Co. (GM) and Honda Motor Co., Ltd. (HMC) reported their financial results.

While weak results were expected from Ford, General Motors recorded a marginal year-over-year improvement. As a result, both stocks surpassed estimates.

Ironically, Honda, which recorded a strong year-over-year improvement, failed to meet estimates and reduced its net income guidance for fiscal 2015. All three stocks recorded losses in the stock market.

Meanwhile, stocks that are set to report earnings next week fared better. Tesla Motors, Inc. (TSLA) gained 3% over the last five trading sessions as CEO Elon Musk tweeted that the company’s global sales figures were a record high in September and increased 65% year over year in North America.

Further, Toyota Motor Corp. (TM) gained 3.2% as it reported global sales of 7.62 million for the first nine months of 2014. As expected, the Japanese automaker surpassed the sales volumes of Volkswagen AG (VLKAY) and General Motors to remain the global leader.

Recap of the Week’s Earnings Results

1. Ford posted better-than-expected third-quarter earnings and revenues. The year-over-year decline in results was expected due to the weak production volume projection announced by the company last month. A cut in the pre-tax profit guidance for 2014, announced in September, also contributed to reduced earnings expectations for the third quarter.

Ford reported earnings per share of 24 cents for the third quarter of 2014, down from 45 cents in the third quarter of 2013 (all excluding special items). However, the company surpassed the Zacks Consensus Estimate of 19 cents. Revenues in the quarter fell 2.5% year over year to $34.9 billion but managed to beat the Zacks Consensus Estimate of $33.34 billion.

Ford expects pre-tax profit, excluding special items, to be around $6 billion in 2014 and $8.5–$9.5 billion in 2015. (Read more: Ford Beats Q3 Earnings & Revenues Estimates, Down Y/Y.)

2. General Motors managed to beat earnings expectations despite missing revenue estimates as both earnings and revenues showed a marginal year-over-year improvement. Strong global sales and rising margins in North America and China offset the challenges in Russia and South America.

General Motors recorded adjusted earnings of 97 cents per share in the third quarter of 2014, beating the Zacks Consensus Estimate of 95 cents. Revenues grew 0.8% year over year to $39.3 billion but missed the Zacks Consensus Estimate of $39.8 billion. (Read more: GM's Strong Global Sales Drive Q3 Earnings Beat.)

3. Honda failed to meet the expectations for earnings and revenues, despite recording an improvement from the prior-year quarter. The company posted a 17.9% year-over-year rise in earnings to ¥141.8 billion ($1.30 billion) or ¥78.73 (72 cents) per share in the second quarter (ended Sep 30, 2014) of fiscal 2015. Earnings per share missed the Zacks Consensus Estimate by 4 cents.

Consolidated net sales and other operating revenues grew 4.3% to year over year ¥3 trillion ($27.5 billion). However, the figure fell short of the Zacks Consensus Estimate of $31.6 billion. The year-over-year increase can be attributed to higher revenues from the automobile and motorcycle businesses as well as favorable foreign currency translation.

For fiscal 2015, Honda expects revenues to increase 7.7% and operating income to rise 2.6%. However, net income is projected to decrease 1.6%. (Read more: Honda Q2 Earnings, Revenues Miss Estimates but Up Y/Y.)

4. Penske Automotive Group, Inc.’s (PAG) earnings were in line with expectations while revenues surpassed estimates. The company’s third-quarter earnings of 85 cents were on par with the Zacks Consensus Estimate but higher than the year-ago figure of 73 cents.

Revenues came in at $4.42 billion, beating the Zacks Consensus Estimate of $4.38 billion and improving from the prior-year quarter revenues of $3.76 billion. The improvement was due to higher retail unit sales.

5. Lear Corp. (LEA) reported a 33.1% rise in adjusted earnings to $1.93 per share in the third quarter, beating the Zacks Consensus Estimate of $1.89. Revenues came in at $4.23 billion, missing the Zacks Consensus Estimate of $4.26 billion. However, revenues were higher than the prior-year quarter figure of $3.92 billion by nearly 8%.

Performance

The fortunes of auto stocks remained mixed over the last five trading sessions. General Motors, Ford and Honda recorded losses, with the Japanese automaker’s loss surpassing that of the U.S automakers. Meanwhile, AutoZone, Inc. (AZO) recorded maximum gains of 5.4%.

Advance Auto Parts Inc. (AAP) gained the maximum in the last six months, while Ford lost the most.

What’s Next in the Auto World?

On Nov 3, automakers are expected to report U.S. auto sales figures for October. With analyst projections that U.S. new vehicle sales for the month will be the highest in any October since 2004, major automakers are also expected to report good sales figures, which will drive their share price.

Meanwhile, a few companies will report their third-quarter earnings in the next few days. Tesla and Toyota are scheduled to report financial results on Nov 5, while Advance Auto Parts is set to release earnings on Nov 6.

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 >>

Read the Full Research Report on F
Read the Full Research Report on PAG
Read the Full Research Report on HMC
Read the Full Research Report on TM
Read the Full Research Report on AAP
Read the Full Research Report on AZO
Read the Full Research Report on LEA
Read the Full Research Report on GM
Read the Full Research Report on VLKAY
Read the Full Research Report on TSLA


Zacks Investment Research