The Q3 earnings season officially kicked off for the auto sector with the Harley-Davidson, Inc. HOG report on Oct 19. The motorcycle maker marginally surpassed earnings estimates but missed on revenues. The overall projections for the sector are looking bleak for the quarter after a strong Q2. Per our Earnings Trends report, auto sector earnings and revenues are expected to be down 19.4% and 4.5%, respectively, in Q3. This will make place it among the worst performers in the 16 Zacks sectors. In comparison, total S&P 500 earnings are projected to decline 2.2%, 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 F, which will record a $640 million recall-related expense in the quarter. As a result, the automaker lowered its pre-tax guidance for 2016 last month and expects 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 three auto stocks that are slated to release their third-quarter 2016 results on Oct 20.
WABCO Holdings Inc. WBC carries a Zacks Rank #3 (Hold). Earnings ESP for the company is currently +2.04% as the Most Accurate estimate of $1.50 stands above the Zacks Consensus Estimate of $1.47. We note that the company delivered positive earnings surprises in three of the last four quarters, with an average positive surprise of 2.38%.
Gentex Corp. GNTX has an Earnings ESP of 0.00%. The Zacks Consensus Estimate for the third quarter is currently pegged at 30 cents. Gentex surpassed earnings estimates in two of the last four quarters and posted in-line results in the other two. This resulted in a positive average surprise of 3.64%. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dana Holding Corporation DAN, a Zacks Rank #2 stock, has an Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter currently stands at 43 cents. The company delivered negative surprises in three of the last four quarters, resulting in an average miss of 9.09% over this period.
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