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Auto Stocks' Q3 Earnings Roster for Oct 26: PCAR, PII & More

For the third quarter, overall earnings for the auto sector are projected to be down 45.6% year over year.

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This story originally appeared on Zacks

The third-quarter earnings season for the Auto-Tires-Trucks sector kicked off last week. So far this earnings season, just two S&P stocks from the Auto-Tires-Trucks sector, namely Tesla TSLA and Genuine Parts GPC, have come up with quarterly numbers. Encouragingly, both the companies have managed to deliver an earnings beat. A host of S&P sector components including PACCAR, Ford, General Motors, O’Reilly as well as LKQ Corp. are slated to release quarterly numbers this week.

- Zacks

In the last reported quarter, the auto sector’s earnings plummeted 638.4%, while revenues were up 74% on a year-over-year basis. For the third quarter, overall earnings for the sector are projected to be down 45.6% year over year. The decline may be primarily because the space’s big operators like General Motors and Ford could not make as many cars as expected as a result of COVID-related supply-chain disruptions and semiconductor shortage. Meanwhile, third-quarter revenues are expected to edge up 5.8% year over year, per the latest Earnings Trend Report.

Let’s take a look at the factors that are likely to have impacted auto stocks during the to-be-reported quarter.

Microchip famine caused a major supply-demand imbalance in third-quarter 2021, with automakers forced to idle production lines across the world. Although buyers’ appetite for personal vehicles was quite strong, the auto industry was unable to meet the mounting demand. U.S. auto sales fell for the fifth consecutive month in September, pulling down third-quarter 2021 total vehicle sales. According to Edmunds.com, September was the worst sales month so far this year, with automakers selling just more than 1 million vehicles. Total third-quarter 2021 sales in the United States were down roughly 14% and 22% from the corresponding period of 2020 and 2019, respectively. While volumes have been impacted, higher average selling price of cars might have offered some respite. Nonetheless, the industry battled high cost of raw materials, and labor and logistical challenges, which are likely to have hurt margins in the quarter to be reported.

Key Releases on Oct 26

PACCAR Inc PCAR: Trucking giant PACCAR delivered an earnings beat in the last reported quarter amid higher-than-anticipated sales in the Parts and Financial Services segment.

Our proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the trailing four quarters, PACCAR beat earnings estimates on three occasions and missed on the other, with the average surprise being 4.6%.

PACCAR Inc. Price and EPS Surprise

PACCAR Inc. Price and EPS Surprise

PACCAR Inc. price-eps-surprise | PACCAR Inc. Quote

However, our proven model does not conclusively predict an earnings beat for the company this time around. This is because it has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for the company’s third-quarter earnings and revenues is pegged at $1.21 per share and $4.49 billion, respectively. The firm is set to report results before the opening bell.

The ongoing global chip deficit is expected to have limited the firm’s deliveries and revenues. In fact, PACCAR notified early this month that the shortage of microchips lowered truck deliveries by 7,000 units sequentially. Precisely, the company estimates third-quarter 2021 deliveries to be 33,000 units, indicating a rise from 36,000 reported in the year-ago period but a decline from 40,100 in second-quarter 2021. Consequently, the consensus mark for revenues from the Trucks segment is pegged at $3,761 million, indicating 7.3% year-over-year growth and a 9.4% sequential decline. Additionally, PACCAR is likely to have bore the brunt of rising commodity prices, which may have clipped gross margins. High R&D costs to support investments in innovative products and technology are also anticipated to have dented operating profits to some extent.

Polaris, Inc. PII: This manufacturer of motorcycles and off-road vehicles came up with an earnings beat in the last reported quarter amid higher-than-expected gross profits across all segments. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average of 29.1%.

Polaris Inc. Price and EPS Surprise

Polaris Inc. Price and EPS Surprise

Polaris Inc. price-eps-surprise | Polaris Inc. Quote

However, our proven model indicates that the company may not be able to maintain an earnings beat streak for the quarter to be reported, as it has a Zacks Rank #3 and an Earnings ESP of -6.49%.

The Zacks Consensus Estimate for the company’s third-quarter earnings and revenues is pegged at $1.96 per share and $2.14 billion, respectively. The firm is set to report results before the opening bell.

Sustained demand growth across the powersports industry and outdoor recreation is expected to have buoyed Polaris’ third-quarter revenues. The Zacks Consensus Estimate for sales from the ORV/Snowmobiles segment — which forms a major chunk of the company’s total revenues — is pegged at $1,347 million, indicating 4.4% year-over-year growth. Stronger volumes aided by the strength of Bennington, Godfrey and Hurricane brands are expected to have driven revenues from the Boats unit. High demand for Polaris Slingshot® Grand Touring LE and Indian Challenger is anticipated to have fueled the Motorcycles unit’s sales. Nonetheless, the company’s gross margins are likely to reflect the negative impact of higher commodity and logistical costs as well as component shortages and plant inefficiencies owing to supply-chain constraints. Evidently, the consensus mark for gross profit from the ORV/Snowmobiles segment stands at $327 million, indicating a fall from $378 million recorded in the prior-year quarter.

Veoneer, Inc. VNE: The auto equipment supplier incurred narrower-than-expected loss in the last reported quarter, courtesy of continued benefits from the firm’s Market Adjustment Initiatives. Over the trailing four quarters, Veoneer beat earnings estimates on three occasions and missed on the other, with the average negative surprise being 0.7%.

Veoneer, Inc. Price and EPS Surprise

Veoneer, Inc. Price and EPS Surprise

Veoneer, Inc. price-eps-surprise | Veoneer, Inc. Quote

Things are not looking up for Veoneer this time around, as it carries a Zacks Rank #4 and an Earnings ESP of -19.78%.

The Zacks Consensus Estimate for the company’s third-quarter loss and revenues is pegged at 89 cents per share and $418 million, respectively. The firm is set to report results before the opening bell.

Chip crunch-related headwinds are likely to have played spoilsports in the to-be-reported quarter. High commodity costs, a tough labor market and logistical challenges are anticipated to have clipped gross profits. The firm has been bearing the brunt of rising R&D expenses for the development of technologically upgraded products and the trend is expected to have continued in the to-be-reported quarter as well, thereby impacting operating margins. On a positive note, higher year-over-year sales in Brake Systems (related to the Honda legacy business) and Active Safety units (aided by robust demand for mono, stereo and thermal camera systems, radar and ADAS electronic control units) might have driven sales of the firm. The Zacks Consensus Estimate for sales from Brake Systems and Active Safety units is pegged at $20 million and $233 million, indicating a rise from the year-ago quarter’s $9 million and $170 million, respectively. However, the consensus mark for revenues from Restraint Control systems is $165 million, implying a fall from $188 million recorded in third-quarter 2020.

Dana Incorporated DAN: The auto equipment provider posted better-than-expected earnings in the last reported quarter, thanks to higher-than-anticipated sales from Commercial Vehicle and Off-Highway segments. Over the trailing four quarters, Veoneer beat earnings estimates on three occasions and missed on the other, with the average surprise being 22.9%.

Dana Incorporated Price and EPS Surprise

Dana Incorporated Price and EPS Surprise

Dana Incorporated price-eps-surprise | Dana Incorporated Quote

However, our model does not predict an earnings beat for Dana this time around, as it carries a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -8.37%.

The Zacks Consensus Estimate for the company’s third-quarter earnings and revenues is pegged at 51 cents per share and $2.14 billion, respectively. The firm is set to report results before the opening bell.

Dana has been undertaking stepped-up efforts to expand electrification strides by offering a broad portfolio of e-Drive technologies and systems, which are expected to have aided revenues amid the soaring popularity of green vehicles. During the quarter, the company launched eS9000r e-Axle for Freightliner Custom Chassis’ all-electric MT50e delivery vehicle. It also launched Zero-8-e-axles for deployment into heavy-duty electric vehicles. During the quarter, Dana also unveiled new high-efficiency e-powershift transmission to speed up the electrification of underground mining vehicles. Yet, high R&D costs and capex requirements to develop technologically advanced products are anticipated to have dented operating margins. As it is, higher raw material costs — especially for steel, logistics constraints and labor shortages related to chip-related disruptions — are expected to have tempered Dana’s margins for the September-end quarter.



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Genuine Parts Company (GPC): Free Stock Analysis Report

 

PACCAR Inc. (PCAR): Free Stock Analysis Report

 

Dana Incorporated (DAN): Free Stock Analysis Report

 

Tesla, Inc. (TSLA): Free Stock Analysis Report

 

Polaris Inc. (PII): Free Stock Analysis Report

 

Veoneer, Inc. (VNE): Free Stock Analysis Report

 

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