We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
A Closer Look at 3 Auto Stocks Positioned for Q4 Earnings Beat
Read MoreHide Full Article
The fourth-quarter earnings season for the Auto-Tires-Trucks sector is in full swing now. So far, seven S&P 500 sector components — Tesla, PACCAR, General Motors, Ford, Cummins, O’Reilly and BorgWarner — have reported quarterly numbers. While Tesla, Cummins and BorgWarner missed fourth-quarter earnings estimates, General Motors, Ford, PACCAR, O’Reilly surpassed the same.
Per the Earnings Trend report dated Feb 7, the auto sector’s earnings for the fourth quarter are expected to decline 32.4% on a year-over-year basis. As for revenues, they are estimated to grow 2.9% year over year.
With a handful of companies left to release fourth-quarter 2023 results, we have identified — with the help of the Zacks Stock Screener — a few auto players, which are positioned to outshine the Zacks Consensus Estimate in fourth-quarter earnings. These include Allison Transmission Holdings (ALSN - Free Report) , Lucid Group (LCID - Free Report) and LKQ Corp. (LKQ - Free Report) . Before we discuss the companies, let’s take a look at the factors shaping the quarterly performance of automotive companies.
Factors at Play
According to S&P Global, fourth-quarter light vehicle production increased 9% year over year. Per Automotive News, U.S. light vehicle sales in the fourth quarter of 2023 topped 3.75 million units, up 8.5% year over year. The seasonally adjusted annualized sales rate for December 2023 was 16.4 million vehicles, the highest level since May 2021. Improving retail inventories aided the U.S. auto market in the fourth quarter. At the beginning of December, new cars and light truck inventory totaled 2.56 million vehicles, representing an increase of more than 900,000 cars and light trucks compared to December 2022, according to Cox Automotive.
The generous incentives offered by automakers are expected to have played a crucial role in boosting retail deliveries in the fourth quarter of 2023, offsetting the impact of high interest rates. However, discounts might have impacted margins. Also, commodity costs, forex woes, tough labor market and logistical challenges are likely to have played spoilsport. Moreover, high operating expenses, including R&D, to develop technologically advanced products to adapt to the changing dynamics of the auto industry are expected to have dented earnings.
Picking Potential Winners
While it is not possible to be sure about which companies are well positioned to beat earnings estimates, our proprietary methodology — Earnings ESP — makes it relatively simple. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with the abovementioned combination, the chances of an earnings beat are as high as 70%.
Our Choices
Allison is a manufacturer of fully automatic transmissions for medium and heavy-duty commercial and heavy-tactical U.S. defense vehicles. The strategic buyouts of Walker Die, C&R Tool & Engineering, Vantage Power, the Off-Highway transmission portfolio of AVTEC and AxleTech’s EV systems division are likely to aid Allison’s third-quarter results. Regular product launches, including FracTran, TerraTran and the 3414 Regional Haul Series fully automatic transmission, bode well.
The eGen Flex portfolio and the eGen Force portfolio demonstrate its ability to adapt to the changing dynamics of the auto industry and are expected to have driven third-quarter revenues. The Zacks Consensus Estimate for the company’s North America On-Highway — which accounts for the bulk of its revenues — is pegged at around $358 million, implying year-over-year growth of 7.5%.
Allison has an Earnings ESP of +3.73% and a Zacks Rank #2. The company is scheduled to release fourth-quarter results on Feb 13. The Zacks Consensus Estimate for ALSN’s to-be-reported quarter’s earnings and revenues is pegged at $1.42 per share and $755.2 million, respectively. The EPS estimate for the fourth quarter has moved by a cent in the past 30 days. ALSN surpassed earnings estimates in the trailing four quarters, with the average surprise being 17.23%.
Allison Transmission Holdings, Inc. Price and EPS Surprise
Electric vehicle maker Lucid produced 2,391 Lucid Air luxury all-electric cars in the fourth quarter of 2023, a 32% decrease compared to the same period last year. Deliveries also saw a downturn, with 1,734 Airs reaching customers globally, marking a 10% year-over-year decrease. However, the production and deliveries improved sequentially. In fact, the fourth-quarter 2023 figures represent the highest output and deliveries for the year, trailing only behind the record-breaking fourth quarter of 2022.
During the quarter under discussion, LCID unveiled its groundbreaking luxury electric SUV, the Lucid Gravity, marking a significant leap forward in EV technology and design. Building upon the innovation in the Lucid Air sedan, Gravity will enter production in the latter part of the year. The model is expected to have a range exceeding 440 miles and a starting price under $80,000. Lucid's innovative design includes an aerodynamic profile with a drag coefficient of less than 0.243, spacious interiors and a user-friendly Clearview Cockpit interface.
LCID has an Earnings ESP of +5.36% and a Zacks Rank #3. The company is scheduled to release fourth-quarter results on Feb 21. The Zacks Consensus Estimate for LKQ’s to-be-reported quarter’s loss is pegged at 28 cents per share, suggesting an improvement from a loss of 40 cents incurred in the year-ago period. The consensus mark for revenues is pegged at $166.7 million. The estimate for fourth-quarter loss per share has narrowed by a penny in the past 30 days. LCID missed earnings estimates in the trailing four quarters, with the average negative surprise being 7.70%.
LKQ is one of the leading providers of replacement parts, components and systems that are required to repair and maintain vehicles. The median age of vehicles on U.S. roads is steadily increasing, reaching a record high of 12.5 years for both cars and trucks.Aging vehicles have a higher demand for spare and replacement parts. Rising demand for replacement parts is likely to bolster LKQ’s fourth-quarter results. Our model forecasts Parts/Services revenues to increase 18% year over year to $3.33 billion.
The acquisition of Uni-Select Inc. for $2.1 billion, completed on Aug 1, 2023, has bolstered LKQ’s global automotive vehicle parts distribution business. The company’s North American and European segments are expected to have performed well. The North American segment is on track to achieve full-year EBITDA margins of more than 19% this year (excluding the anticipated dilution of Uni Select). The company’s 1 LKQ Europe program is aiding the segment with robust revenues and EBITDA growth and is expected to have been a driving force in productivity improvements. A strategic partnership with Mobivia is also likely to have boosted LKQ’s Europe unit prospects. These factors will aid LKQ’s upcoming results.
LKQ has an Earnings ESP of +5.40% and a Zacks Rank #3. The company is scheduled to release fourth-quarter results on Feb 22. The Zacks Consensus Estimate for LKQ’s to-be-reported quarter’s earnings and revenues is pegged at 75 cents per share and $3.51 billion, respectively. The EPS estimate for the fourth quarter has remained unchanged in the past 60 days. LKQ surpassed earnings estimates in two of the trailing four quarters for as many misses, with the average negative surprise being 1.36%.
Image: Bigstock
A Closer Look at 3 Auto Stocks Positioned for Q4 Earnings Beat
The fourth-quarter earnings season for the Auto-Tires-Trucks sector is in full swing now. So far, seven S&P 500 sector components — Tesla, PACCAR, General Motors, Ford, Cummins, O’Reilly and BorgWarner — have reported quarterly numbers. While Tesla, Cummins and BorgWarner missed fourth-quarter earnings estimates, General Motors, Ford, PACCAR, O’Reilly surpassed the same.
Per the Earnings Trend report dated Feb 7, the auto sector’s earnings for the fourth quarter are expected to decline 32.4% on a year-over-year basis. As for revenues, they are estimated to grow 2.9% year over year.
With a handful of companies left to release fourth-quarter 2023 results, we have identified — with the help of the Zacks Stock Screener — a few auto players, which are positioned to outshine the Zacks Consensus Estimate in fourth-quarter earnings. These include Allison Transmission Holdings (ALSN - Free Report) , Lucid Group (LCID - Free Report) and LKQ Corp. (LKQ - Free Report) . Before we discuss the companies, let’s take a look at the factors shaping the quarterly performance of automotive companies.
Factors at Play
According to S&P Global, fourth-quarter light vehicle production increased 9% year over year. Per Automotive News, U.S. light vehicle sales in the fourth quarter of 2023 topped 3.75 million units, up 8.5% year over year. The seasonally adjusted annualized sales rate for December 2023 was 16.4 million vehicles, the highest level since May 2021. Improving retail inventories aided the U.S. auto market in the fourth quarter. At the beginning of December, new cars and light truck inventory totaled 2.56 million vehicles, representing an increase of more than 900,000 cars and light trucks compared to December 2022, according to Cox Automotive.
The generous incentives offered by automakers are expected to have played a crucial role in boosting retail deliveries in the fourth quarter of 2023, offsetting the impact of high interest rates. However, discounts might have impacted margins. Also, commodity costs, forex woes, tough labor market and logistical challenges are likely to have played spoilsport. Moreover, high operating expenses, including R&D, to develop technologically advanced products to adapt to the changing dynamics of the auto industry are expected to have dented earnings.
Picking Potential Winners
While it is not possible to be sure about which companies are well positioned to beat earnings estimates, our proprietary methodology — Earnings ESP — makes it relatively simple. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with the abovementioned combination, the chances of an earnings beat are as high as 70%.
Our Choices
Allison is a manufacturer of fully automatic transmissions for medium and heavy-duty commercial and heavy-tactical U.S. defense vehicles. The strategic buyouts of Walker Die, C&R Tool & Engineering, Vantage Power, the Off-Highway transmission portfolio of AVTEC and AxleTech’s EV systems division are likely to aid Allison’s third-quarter results. Regular product launches, including FracTran, TerraTran and the 3414 Regional Haul Series fully automatic transmission, bode well.
The eGen Flex portfolio and the eGen Force portfolio demonstrate its ability to adapt to the changing dynamics of the auto industry and are expected to have driven third-quarter revenues. The Zacks Consensus Estimate for the company’s North America On-Highway — which accounts for the bulk of its revenues — is pegged at around $358 million, implying year-over-year growth of 7.5%.
Allison has an Earnings ESP of +3.73% and a Zacks Rank #2. The company is scheduled to release fourth-quarter results on Feb 13. The Zacks Consensus Estimate for ALSN’s to-be-reported quarter’s earnings and revenues is pegged at $1.42 per share and $755.2 million, respectively. The EPS estimate for the fourth quarter has moved by a cent in the past 30 days. ALSN surpassed earnings estimates in the trailing four quarters, with the average surprise being 17.23%.
Allison Transmission Holdings, Inc. Price and EPS Surprise
Allison Transmission Holdings, Inc. price-eps-surprise | Allison Transmission Holdings, Inc. Quote
Electric vehicle maker Lucid produced 2,391 Lucid Air luxury all-electric cars in the fourth quarter of 2023, a 32% decrease compared to the same period last year. Deliveries also saw a downturn, with 1,734 Airs reaching customers globally, marking a 10% year-over-year decrease. However, the production and deliveries improved sequentially. In fact, the fourth-quarter 2023 figures represent the highest output and deliveries for the year, trailing only behind the record-breaking fourth quarter of 2022.
During the quarter under discussion, LCID unveiled its groundbreaking luxury electric SUV, the Lucid Gravity, marking a significant leap forward in EV technology and design. Building upon the innovation in the Lucid Air sedan, Gravity will enter production in the latter part of the year. The model is expected to have a range exceeding 440 miles and a starting price under $80,000. Lucid's innovative design includes an aerodynamic profile with a drag coefficient of less than 0.243, spacious interiors and a user-friendly Clearview Cockpit interface.
LCID has an Earnings ESP of +5.36% and a Zacks Rank #3. The company is scheduled to release fourth-quarter results on Feb 21. The Zacks Consensus Estimate for LKQ’s to-be-reported quarter’s loss is pegged at 28 cents per share, suggesting an improvement from a loss of 40 cents incurred in the year-ago period. The consensus mark for revenues is pegged at $166.7 million. The estimate for fourth-quarter loss per share has narrowed by a penny in the past 30 days. LCID missed earnings estimates in the trailing four quarters, with the average negative surprise being 7.70%.
Lucid Group, Inc. Price and EPS Surprise
Lucid Group, Inc. price-eps-surprise | Lucid Group, Inc. Quote
LKQ is one of the leading providers of replacement parts, components and systems that are required to repair and maintain vehicles. The median age of vehicles on U.S. roads is steadily increasing, reaching a record high of 12.5 years for both cars and trucks.Aging vehicles have a higher demand for spare and replacement parts. Rising demand for replacement parts is likely to bolster LKQ’s fourth-quarter results. Our model forecasts Parts/Services revenues to increase 18% year over year to $3.33 billion.
The acquisition of Uni-Select Inc. for $2.1 billion, completed on Aug 1, 2023, has bolstered LKQ’s global automotive vehicle parts distribution business. The company’s North American and European segments are expected to have performed well. The North American segment is on track to achieve full-year EBITDA margins of more than 19% this year (excluding the anticipated dilution of Uni Select). The company’s 1 LKQ Europe program is aiding the segment with robust revenues and EBITDA growth and is expected to have been a driving force in productivity improvements. A strategic partnership with Mobivia is also likely to have boosted LKQ’s Europe unit prospects. These factors will aid LKQ’s upcoming results.
LKQ has an Earnings ESP of +5.40% and a Zacks Rank #3. The company is scheduled to release fourth-quarter results on Feb 22. The Zacks Consensus Estimate for LKQ’s to-be-reported quarter’s earnings and revenues is pegged at 75 cents per share and $3.51 billion, respectively. The EPS estimate for the fourth quarter has remained unchanged in the past 60 days. LKQ surpassed earnings estimates in two of the trailing four quarters for as many misses, with the average negative surprise being 1.36%.
LKQ Corporation Price and EPS Surprise
LKQ Corporation price-eps-surprise | LKQ Corporation Quote
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar