Car ETF in Focus Post Upbeat Auto Earnings – Nasdaq

Posted: Monday, August 08, 2016

The automobile sector has been seeing certain favorable elements
such as low fuel prices and a low interest rate environment. These
factors failed to translate into impressive growth numbers during
the second quarter (read:
4 Sector ETFs at a Bargain

).

As per our Earnings Trends report, the Auto sector reported one of
the highest growth rates this quarter with 16.3% earnings growth on
higher revenues of 5.2%. Earnings and revenue beat ratios of 81.8%
and 72.7%, respectively, were also impressive. Below we have
highlighted in detail quarterly results of some of the major auto
companies that have reported recently.


Auto Earnings in Detail

The largest U.S. automaker,
General Motors Co.’s

GM

adjusted earnings of $1.86 per share for the quarter beat the Zacks
Consensus Estimate of $1.52 by a wide margin. Earnings increased
44% year over year. Revenues in the reported quarter were $42.4
billion, up 11% year over year, beating the Zacks Consensus
Estimate of $39.1 billion.

The second-largest carmaker by sales,
Ford Motor Co.

F

posted adjusted earnings per share of 52 cents in the second
quarter, down couple of cents from the prior-year quarter and short
of the Zacks Consensus Estimate of 60 cents. Revenues increased
5.9% to $39.5 billion and surpassed the Zacks Consensus Estimate of
$36.62 billion. For 2016, the company expects pre-tax profit,
earnings per share, revenue and Automotive operating margin to be
equal to or higher than 2015 levels.

Japanese automaker,
Honda Motor Co., Ltd.

HMC

reported earnings per share of ¥96.93 (94 cents) in the first
quarter of fiscal 2017 (ended June 30, 2016), down 6.1% from the
year-ago quarter. The Zacks Consensus Estimate was earnings of 71
cents per share. Consolidated net sales and other operating
revenues went down6.3% year over year to ¥3.47 trillion ($33.74
billion). The figure, however, surpassed the Zacks Consensus
Estimate of $32.6 billion. For fiscal 2017, Honda expects revenues
to decline 5.8% to ¥13.75 trillion ($130.95 billion).

Another Japanese automaker,
Toyota Motor Corporation

TM

posted earnings of $3.32 per ADR in its fiscal 2017first quarter,
beating the Zacks Consensus Estimate of $2.30. The company’s
consolidated revenues fell 5.7% year over year to ¥6.58 trillion
($61 billion) but were ahead of the Zacks Consensus Estimate of
$59.2 billion. Toyota’s consolidated revenue guidance of ¥26
trillion ($254.9 billion) for fiscal 2017 reflects an8.5% decline
from fiscal 2016.

While Toyota, Honda and General Motors reported
better-than-expected earnings and revenues for the second quarter,
Ford reported mixed results. This puts the spotlight on the
exclusive auto ETF,
First Trust NASDAQ Global Auto Index Fund

CARZ

, which has a sizable exposure to the above mentioned stocks. CARZ
gained almost 0.9% (as of August 4, 2016) in the last 10 days. Let
us take a look at this ETF in detail (see all
Consumer Discretionary ETFs here

).

CARZ in Focus

This ETF tracks the NASDAQ OMX Global Auto Index, having exposure
to automobile manufacturers across the globe. The product holds 33
stocks in the basket with Honda, Ford, General Motors and Toyota
placed among the top five holdings with a combined allocation of
nearly 32% of fund assets. Other firms hold less than 5% of assets.

In terms of country exposure, Japan takes the top spot at 36.3%
while the U.S. takes the second spot having a 22.5% allocation,
followed by Germany and China with 18.3% and 7.4% allocations,
respectively.

The ETF is neglected with $39.6 million in AUM and sees light
trading volume of around 7,200 shares. The product is a bit
expensive with 70 bps in annual fees and currently has a Zacks ETF
Rank #5 or ‘Strong Sell’ rating with a High risk outlook (read:
Q2 Earnings to Gather Steam: 4 Sector ETFs &
Stocks to Play

).

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Today, you can download 7 Best Stocks for the Next 30 Days.
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FORD MOTOR CO (F): Free Stock Analysis Report

HONDA MOTOR (HMC): Free Stock Analysis Report

TOYOTA MOTOR CP (TM): Free Stock Analysis
Report

GENERAL MOTORS (GM): Free Stock Analysis Report

FT-NDQ GL AUTO (CARZ): ETF Research Reports

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