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Auto Stock Roundup: Harley Beats Estimates, Honda Recalls, General Motors Ties Up With Uber

The auto sector is currently facing a lot of challenges. The problem of high-levels of inventory is putting pressure on auto stocks.

In fact, General Motors Company GM has lowered the outlook for new vehicle sales in the U.S. in 2017. This is an indication of the industry heading for a moderate downturn in 2017. A glut in nearly-new used vehicles is expected to undermine sales this year.

Added to this, the U.S. government’s plans of exiting North American Free Trade Agreement (NAFTA) and introducing a border-tax system have worsened prospects of auto stocks. This would increase the cost of U.S. cars and threaten jobs of thousands of suppliers.

Recap of the Week’s Most Important Stories

1.    Honda Motor Co., Ltd. HMC has decided to recall 1.2 million Accord midsize cars, according to a Bloomberg report. A problem in the battery sensor, which can lead to an electric short and even a fire, has prompted the Japanese automaker to take such a decision.

Four cases of engine compartment fires resulting from battery sensor-related problem have been reported to Honda. All the cases have been reported from states where salt is used to clear roads during winter (read more: Honda Recalls 1.2M Accord Due to Battery Sensors Issues).

Currently, Honda has a Zacks Rank # 3.

2.    General Motors has entered into a partnership with Uber Technologies Inc to expand its car-sharing operation Maven, in Australia, through a pilot program, per Reuters. The agreement will enable Uber drivers to rent cars produced by General Motors’ Australian manufacturer GM Holden.

Per the news, General Motors is trying to adopt Maven Gig in Sydney through a pilot program. The Maven Gig program of General Motors is an attempt toward helping drivers to rent cars on demand for independent activities. This includes package delivery, food or grocery delivery, ridesharing etc (read more: General Motors, Uber Tie Up to Expand Maven Gig in Sydney).

Currently, General Motors carries a Zacks Rank # 3.

3.    Harley-Davidson, Inc. HOG reported earnings of $1.48 per share in the second quarter of 2017, beating the Zacks Consensus Estimate of $1.37. However, earnings were lower than $1.55 recorded in the year-ago quarter.

Net income decreased to $258.9 million from $280.4 million, recorded a year ago.

Motorcycle and related products revenue declined to $1.58 billion in the second quarter of 2017 from $1.67 billion in the year-ago quarter. The figure missed the Zacks Consensus Estimate of $1.6 billion. The company also logged consolidated revenues of $1.77 billion, which deteriorated from the prior-year tally of $1.86 billion (read more: Harley-Davidson Q2 Earnings Beat Estimates, Fall Y/Y).

Harley-Davidson carries a Zacks Rank # 4 (Sell).

4.    Thor Industries Inc.’s THO subsidiary Thor Motor Coach is enlarging its operation in Elkhart, Wakarusa and Bristol towns of Elkhart County, IN. Good news is that, this facility growth includes addition of new facilities or development of the existing ones in northern Indiana.

In Wakarusa, IN, the company will be buying existing buildings for production of Class C products. To assist motorhome production, a new lamination operation with six lamination lines, will be purchased.

In Bristol, IN, Thor Motor Coach is on the verge of completing its addition of a Class C campus to aid the Quantum motorhome line. While in Elkhart, IN, the company is adding a Class A plant to be used for the upcoming second production of Class A motorhome gas models (read more: Thor's Motor Coach Unit to Expand Motorhome Sites in Indiana).

Thor Industries sports a Zacks Rank #1 (Strong Buy). You can see https://www.zacks.com/registration/premium/login/?continue_t...">the complete list of today’s Zacks #1 Rank stocks here.

5.    The U.S. government’s plans of exiting North American Free Trade Agreement and introducing a border-tax system are likely to be costly for the auto sector, per Bloomberg news. This would increase the cost of U.S. cars and threaten jobs of thousands of suppliers.

Per a report by Boston Consulting Group, introduction of tariff in the range of 20–35% would increase the annual costs of automakers and suppliers by $27 billion. A tariff of 20% would raise the production cost to $650 per vehicle.

Performance

Among these stocks, Harley-Davidson recorded highest decline in the last one week, whereas Ford recorded the highest increase.

In the last 6 months, Tesla is the only stock whose price has risen. In the last six months, Advance Auto Parts, Inc. AAP recorded the steepest decline.

 

Company

Last 1-Week Period

Last 6 Months

GM

2.7%

-0.4%

F

3.1%

-3.9%

TSLA

-1.3%

30.7%

TM

-0.2%

-7.2%

HMC

0.8%

-8.6%

HOG

-3.1%

-17.7%

AAP

-0.1%

-39.8%

AZO

0.1%

-33.3%

What’s Next in the Auto Space?

The second-quarter 2017 earnings season is underway. Big auto companies which are slated to report their earnings in the next few days are General Motors, Ford Motor Company F and PACCAR Inc PCAR.

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Ford Motor Company (F): Free Stock Analysis Report
 
PACCAR Inc. (PCAR): Free Stock Analysis Report
 
General Motors Company (GM): Free Stock Analysis Report
 
Honda Motor Company, Ltd. (HMC): Free Stock Analysis Report
 
Advance Auto Parts Inc (AAP): Free Stock Analysis Report
 
Thor Industries, Inc. (THO): Free Stock Analysis Report
 
Harley-Davidson, Inc. (HOG): Free Stock Analysis Report
 
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