Auto Stock Roundup: December Sales Figures Out, Tesla Pushes Model 3 Production Target

Last week saw major U.S. automakers coming up with December and 2017 auto sales. After a record 2016, U.S. auto sales declined in 2017. This is the first time since the financial crisis that auto sales have declined from that of prior-year figure. According to Autodata, in 2017, U.S. auto sales were 17.2 million, down from the prior-year figure of 17.85 million. Despite the decline, 2017 was a robust year for the auto industry as a whole.

In December, domestic auto companies collectively reported lower U.S. sales. General Motors Company GM and Fiat Chrysler Automobiles N.V. FCAU reported year-over-year sales decline in December, while Ford Motor Company F reported sales increase.

Also, major automakers project 2018 auto sales to remain weak. Dealing with consumers’ changing preference for pickup trucks and SUVs to passenger cars, would be a challenge for automakers. At the same time, higher interest rates, despite robust growth expectation, will continue to pose challenges for automakers in 2018.
 

 

(Read the previous roundup here: Auto Stock Roundup for Dec 28, 2017)

Recap of the Week’s Most Important Stories

1.    The National Highway Traffic Safety Administration, is examining if Ford’s recall cases can be extended to include additional vehicles. This has posed a challenge for the U.S. auto giant.

Notably, in 2016, Ford recalled 153,000 vehicles because it feared that drivers could lose control of the vehicle due to unexpected shift of the automatic transmissions into first gear. The recalls included F-150 pickups, Ford Expedition and Lincoln Navigator SUVs and Ford Mustang sports cars between 2011 and 2012 model years.

Currently, the Federal safety officials are investigating if Ford should have included more than a million additional vehicles, including F-150s, Navigators and Expeditions from the 2011, 2012 and 2013 model years.

In December 2017, Ford announced that it is in the process of issuing two safety recalls and two safety compliance recalls in North America. In October 2017, the company announced that it would recall 1.34 million units of 2015-17 Ford F-150 and 2017 Ford Super Duty trucks in North America to add water shields to side door latches in the trucks (read more: Ford's 2016 Recalls Under Federal Safety Officials Scrutiny).

Currently Ford has a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank stocks here.

2.    Magna International Inc. MGA concluded the second program of its two share repurchase initiatives, announced on Nov 21, 2017. The two programs followed two separate issuer bid exemption orders issued by the Ontario Securities Commission.

Magna planned to cancel the common shares purchased through these two programs.

Upon completion of the first program announced on Dec 6, the company repurchased a total of 1,472,000 common shares for an aggregate price of $101.2 million.

In the second program announced on Dec 29, it bought back 395,100 common shares for an approximate price of CAD $27.5 million. Shares acquired from both the programs have been canceled.

These buyback programs are part of Magna’s normal course issuer bid for up to 35,800,000 common shares.

Prior to this, in the third quarter of 2017, Magna repurchased shares worth 8.7 million for $422 million. Further, it paid a dividend of $99 million (read more: Magna Completes the Second Common Share Repurchase Program).

Currently Magna has a Zacks Rank #3.

3.    Tesla, Inc. TSLA has once again pushed back its production target of new Model 3 sedan and expects to reach the goal of producing 5,000 vehicles per week by the end of second quarter, per a Reuters report. However, the company said that it has made progress in tackling manufacturing challenges that hindered the rollout of the vehicle.

Notably, Model 3 is crucial in the sustained success of Tesla. This relatively less-expensive electric vehicle is capable of transforming Tesla into a mass producer, amidst increasing rivalry in the EV space.  

Tesla has made good progress in curbing production bottlenecks toward the end of the fourth quarter. The company now projects to make 10,000 Model 3s per month by the end of the first quarter and 20,000 Model 3s per month by the end of the second quarter. Presently, the company is focusing on quality and efficiency and not just on meeting production targets.

Currently Tesla has a Zacks Rank #3.

4.    Penske Automotive Group, Inc. PAG announced that it has closed the acquisition of The Car People. The acquired company is a U.K.-based retailer of good quality used vehicles at fixed prices.

Annually, The Car People sells approximately 18,000 vehicles and is expected to earn annualized revenues of roughly $300 million.

Per management, purchase of The Car People will help Penske Automotive develop its used car business segment and reinforce its position in the United Kingdom, the company’s second-largest market.

Now that the transaction is complete, the combined entity in the used car supermarket business in the country is expected to sell more than 55,000 vehicles per annum.

Additionally, on an annualized basis, Penske Automotive projects earnings growth of around 5-7 cents per share.

Penske Automotive carries a Zacks Rank #3.

Performance

Last week, the steepest increase was registered by Advance Auto Parts, Inc. Among these stocks, only Harley-Davidson, Inc. HOG saw a decline.

In the last six months, the steepest increase and the sharpest decline were witnessed by AutoZone, Inc. and Harley-Davidson, respectively.

Company	Last Week	Last 6 Months
GM	3.7%	22.3%
F	2.1%	13%
TSLA	1.8%	-3%
TM	1.5%	19.9%
HMC	1.4%	25.2%
HOG	-2.3%	-7.1%
AAP	7.3%	1.7%
AZO	6%	45%

What’s Next in the Auto Space?

Watch out for the usual news releases of other auto companies over the next week.

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Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report
 
Ford Motor Company (F) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Tesla Inc. (TSLA) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
Magna International, Inc. (MGA) : Free Stock Analysis Report
 
Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report
 
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