Auto Stock Roundup: Pickup Demand Up, TSLA To Lower Norway Delivery, F Inks MoU

It was a week that saw major auto companies undertaking initiatives to enhance their position in the pickup segment as well as planning to lower sedan production. In fact, these two strategies are not conflicting at all. As conventional compact and mid-size cars have started to lose favor among customers and demand for SUVs and pickup trucks has increased, automakers have started to reorient their programs and strategies.

In the past week, German vehicle behemoth Volkswagen (DE:VOWG_p) AG reportedly showed interest to augment its position in the midsize pickup segment with a U.S.-made pickup, which is likely to be manufactured in Tennessee. Again, according to the Wall Street Journal, Japanese auto giant Honda Motor Co., Ltd. (NYSE:HMC) has decided to halt the production of Accord sedan for two weeks. The auto maker has taken such a decision as it intends to adjust fat inventories and align its production with the current market situation.

Also, the week saw earnings announcement from Westport Fuel Systems Inc.’s (NASDAQ:WPRT) and inking of memoranda of understanding (MoU) by Ford Motor Co. (NYSE:F) with Mahindra & Mahindra Ltd. to develop a new electric vehicle (EV) and sports utility vehicles (SUVs).

(Read the previous roundup here: Auto Stock Roundup for Mar 22, 2018)

Recap of the Week’s Most Important Stories

1. Westport Fuel Systems’ fourth-quarter 2017 adjusted net loss from continuing operations was 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 13 cents.

Also, total net loss from continuing operations in the quarter was $19.2 million from the net loss of $44.4 million in fourth-quarter 2016.

Westport Fuel Systems logged consolidated revenues of $64.2 million in the quarter, up 7% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $55.3 million. This upside was driven by the initial shipments of the Westport HPDI 2.0 product and an increase in the value of Euro compared with the U.S. dollar.

For 2017, the company reported revenues of $247.1 million, up from the 2016 figure of $177.4 million.

During the quarter, consolidated gross margin increased to $16 million (25% of sales) from $13.1 million (23% of sales) recorded in the year-ago quarter. This improvement came from higher revenues and better operating efficiencies.

Consolidated adjusted EBITDA amounted to a negative $3.5 million compared with a negative $10.6 million in the prior-year quarter. (Read more: Westport Fuel Q4 Earnings & Revenues Beat Estimates)

Westport Fuel Systems carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Ford inked five new MoUs with Mahindra & Mahindra, an Indian automotive manufacturing company, to develop a new electric vehicle EV and sports utility vehicles SUVs. Both the companies will strengthen their strategic coalition and develop products for emerging markets, including India.

Announced in September 2017, the recently signed alliance will jointly develop a mid-size SUV on Mahindra’s platform. However, the new SUV will be sold by both companies under separate brands.

Additionally, the alliance will evaluate on co-developing an electric vehicle and a compact SUV by utilizing shared powertrains. In order to widen Ford’s vehicle offering, it might use Mahindra’s powertrains. The collaboration also has plans to jointly develop a suite of connected car solutions, which is in sync with Ford’s commitment to offering safer options for its consumers, globally.

Beside electrification and utility vehicles as key areas, both companies will work on the needs of consumers while leveraging on the benefits of Ford’s skill and global reach and Mahindra’s presence in India. With these new initiatives, the alliance aims to drive synergies and strengthen efficiencies.

Moreover, teams from Ford and Mahindra will look for avenues of strategic cooperation to deal with future mobility needs while supporting Mahindra’s reach in emerging markets and Ford’s manufacturing and distribution networks. (Read more: Ford and Mahindra to Build EV, SUVs for Emerging Markets)

Ford carries a Zacks Rank #3.

3. According to CNBC, Tesla, Inc.’s (NASDAQ:TSLA) CEO Elon Musk has asked his team in Norway to slow down deliveries of electric cars due to issues pertaining to the local manufacturing supply chain. Notably, the electric vehicle maker is experiencing a lack of giant trucks to carry its vehicles safely around Norway. A truck, which was carrying Tesla Model S vehicles, was recently embroiled in an accident.

Two Tesla vehicles were crushed by the upper deck of the truck. Musk said, “I have just asked our team to slow down deliveries. It is clear that we are exceeding the local logistics capacity due to batch build and delivery. Customer happiness & safety matter more than a few extra cars this quarter.”

Norwegians are enthusiastic about Tesla electric vehicles. In 2017, the number of electric and hybrid vehicles registration was more than 50% of new registrations in Norway, driven by generous government subsidies. However, it has not been mentioned by how much the deliveries will be lowered and of which model(s).

In fact, Tesla is grappling with several challenges as it strives to bring electric vehicles into the mass market. Its future rests on the efficient and hassle-free production of Model 3 sedan. (Read more: Tesla to Lower Down Vehicle Deliveries in Norway)

Tesla carries a Zacks Rank #4 (Sell).

4. BorgWarner Inc. (NYSE:BWA) introduced its Electro-Mechanical On-Demand (EMOD) transfer case in the advanced Ram 1500 pickup truck. Built on the company’s Torque-On-Demand clutching system, the new transfer case offers swift response and advanced torque on both on- and off-road performances.

Except for this recent offering, BorgWarner has been delivering its transfer cases for production vehicles under the Ram brand since 2010.

Enabled with matchless clutch control and actuation capabilities, BorgWarner’s EMOD transfer case can be used in different vehicle types, ranging from heavy-duty pickup trucks to small SUVs. Its easy traction calibration makes it suitable for a wide-range of vehicles.

Moreover, with a distinct shift in consumer preferences to SUVs and pickup trucks, automakers are launching newer models with comfortable design packages per requirements. Further, the launch of BorgWarner’s EMOD transfer case will enable automakers to manufacture superior vehicle models. (Read more: BorgWarner Introduces On-Demand EMOD Transfer Case)

BorgWarner carries a Zacks Rank #2 (Buy).

5. Magna International Inc. announced the opening of its seat manufacturing facility in Spartanburg County, SC. This marks the fourth manufacturing facility of Magna International in South Carolina. Moreover, the company will supply these premier seats to BMW AG. At present, the other three manufacturing hubs employ roughly 1,450 people.

The facility has an area of 230,000 square-feet and will employ 480 people approximately. Further, with construction in progress, the company plans to expand the hub by adding 25,000 square-feet that will create 130 additional jobs.

Per management, the addition of a new manufacturing facility will help it develop its business in North America. A skilled workforce, committed to the company’s world-class manufacturing, will enable Magna International to nurture itself to be a premier seat supplier, globally. (Read more: Magna Opens Seat Manufacturing Hub in South Carolina)

Magna carries a Zacks Rank #3.

Performance

Last week, all these stocks, except Toyota Motor Corp. (NYSE:TM) and Advance Auto Parts, Inc. (NYSE:AAP) reported a decline in price. The sharpest decline was witnessed by Tesla.

In the last six months, the maximum rise was recorded by Advance Auto Parts while Tesla shares declined the most.

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