The Q3 earnings season officially started for the auto sector with a beat by Harley-Davidson, Inc. (NYSE:HOG) and a miss by Genuine Parts Company (NYSE:GPC) . Nearly 20% of the sector’s companies had posted results as of Oct 19. These companies recorded a year-over-year decline of 8.8% in earnings and 0.6% in revenues, per our Earnings Trend report. In comparison, total S&P 500 companies that have reported so far posted a 3.8% increase in earnings and a 3.6% rise in revenues.
The overall projections for the auto sector are looking bleak for Q3 after a strong Q2. By the end of Q3, auto sector earnings and revenues are expected to be down 19.8% and 4.5%, respectively. This will place it among the worst performers in the 16 Zacks sectors. In comparison, total S&P 500 earnings are projected to decline 1%, with revenues rising 1.5% year over year.
A large part of the projected earnings decline in the auto sector is expected due to Ford Motor Company (NYSE:F) , which will record a $640 million recall-related expense in the quarter. As a result, last month the automaker lowered its pre-tax guidance for 2016 to a projection of a year-over-year decline.
Moreover, the fall in U.S. auto sales over the last two months is expected to weigh on the results of many automakers. The pressure to maintain attractive incentives and deals may also strain their margins. Moreover, expenses related to safety recalls and the negative impact of foreign currency translation remain headwinds for the sector.
However, there are a few positives for the sector as well. Strong sales growth in China and Europe is the primary driving factor for the auto sector in Q3. Moreover, low fuel prices are driving the sales of higher margin vehicle segments, such as SUVs and light trucks.
So, let’s see what awaits these two auto stocks that are slated to release their third-quarter 2016 results early next week.
Allison Transmission Holdings, Inc. (NYSE:ALSN) has an Earnings ESP of 0.00%. The Zacks Consensus Estimate for the third quarter is currently pegged at 24 cents. Allison Transmission surpassed earnings estimates in three of the last four quarters. This resulted in a positive average surprise of 2.15%. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ALLISON TRANSMN Price and EPS Surprise
ALLISON TRANSMN Price and EPS Surprise | ALLISON TRANSMN Quote
Wabash National Corp. (NYSE:WNC) holds a Zacks Rank #4 (Sell). Earnings ESP for the company is currently 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 48 cents. We note that the company delivered positive earnings surprises in each of the trailing four quarters, with an average positive surprise of 35.02%.
WABASH NATIONAL Price and EPS Surprise
WABASH NATIONAL Price and EPS Surprise | WABASH NATIONAL Quote
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FORD MOTOR CO (F): Free Stock Analysis Report
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GENUINE PARTS (GPC): Free Stock Analysis Report
HARLEY-DAVIDSON (HOG): Free Stock Analysis Report
ALLISON TRANSMN (ALSN): Free Stock Analysis Report
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