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Auto Stock Roundup: Lear Raises Dividend; Ford, Tesla Outline Expansion Plans

Zacks

The auto sector saw mixed developments in the past week but most of the companies from this space witnessed positive stock price movement. Ford Motor Co. F announced new investments, while Lear Corporation LEA increased its authorized share repurchase program and quarterly dividends.

However, Tata Motors Limited TTM reported significantly weak quarterly results. Toyota Motor Corporation TM began the sales of its improved plug-in hybrid vehicle in Japan but also recalled all Mirai cars sold by it.

Tesla Motors, Inc. TSLA expanded into the Middle East with operations commencing in Dubai. The company also announced further expansion plans.

(Read the previous roundup here: Auto Stock Roundup for Feb 9, 2017)


Recap of the Week’s Most Important Stories

1. Ford has announced its decision to invest around $1 billion in Agro Al, an artificial intelligence company, over the next five years. The company is expected to develop a virtual driver system for Ford’s autonomous vehicle, which is due to launch in 2021. Agro Al and Ford’s autonomous vehicle software developers will collaborate to promote the commercialization of driverless cars. (Read more: Ford to Invest $1 Billion in Argo AI Over Next 5 years).

Ford has also announced its decision to invest $200 million in an innovative aerodynamic testing facility that will simulate driving conditions to improve fuel economy. Construction of the 13-acre complex in Michigan is expected to commence this year.

Ford carries a Zacks Rank #3 (Hold).

2. Lear’s current authorized share repurchase program has been increased to $1 billion and the repurchase period has been extended to Dec 31, 2019. The company began the program in 2011 and has bought back roughly 40% of its outstanding shares since, returning about $3.5 billion to shareholders.

Lear had roughly $341 million left under the repurchase program at the end of 2016. Moreover, the company has hiked its quarterly cash dividend on the common stock by 67%, increasing it from 30 cents a share to 50 cents.

Lear currently holds a Zacks Rank #2 (Buy).

3. Tata Motors recently reported results for the quarter ended Dec 31, 2016. The company’s consolidated profit after tax for the quarter plunged 96.2% year over year. The company’s bottom line was adversely affected by negative currency translations and a weak performance in the Jaguar Land Rover (“JLR”) business segment. The JLR business witnessed weaker product mix and lower wholesale volumes in the quarter.

The company’s commercial vehicles segment also saw lower demand due to the demonetization of high-value currencies in India. Management expects the JLR segment margins to be better in the next quarter, supported by new launches. However, it continues to face the risks related to Brexit as JLR units are primarily manufactured in the U.K. as well as the border tax that is being considered by the Trump administration.

Tata Motors currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

4. Toyota began sales of its revamped plug-in hybrid, Prius PHV, in Japan this week. The improved model has a longer cruising range and charges faster. The company began sales of the model in U.S. late last year under the name of Prius Prime. However, currently Toyota expects to sell just 2,500 PHV’s per month in Japan. The company has sold over 10 million units of the Prius globally, since it went on sale in 1997.

Earlier in the week, Toyota also announced its decision to recall all 2,800 zero-emission Mirai cars that it has sold. The decision to recall the vehicles was due to problems in thier fuel cell system. The company will update the fuel cell system of the recalled cars at no expense to the customer.

Toyota carries a Zacks Rank #3.

5. Tesla has begun operations in Dubai, marking the company’s entry into the Middle East. The company is currently taking orders online while a pop up store and a service centre in the city, due to open in July, are being constructed. Musk, Tesla CEO, also outlined plans to open a store and service centre in Abu Dhabi in 2018 and further expand to Oman, Bahrain and Saudi Arabia. The vehicles, expected to start delivering by Jul 2017, can currently be charged at home or across 28 locations across UAE, which the company hopes to expand to 50 by the end of 2017.

Further, Dubai's Road & Transport Authority (RTA) has also announced its decision to purchase 200 vehicles from the company. The RTA will be buying Model S sedans and Model X SUVs to be used by the Dubai Taxi Corporation. (Read more: Tesla Inks Deal to Sell 200 Electric Vehicles to Dubai's RTA).

Tesla carries a Zacks Rank #4 (Sell).

Performance

Most auto stocks recorded gains in the last week. AutoZone, Inc. AZO was the only stock that posted a loss among the stocks listed below, while Tesla gained the most.

Over the last six months, Tesla was the biggest gainer, while AutoZone was the worst performer.

Company

Last 1-Week Period

Last 6 Months

GM

+5.5%

+16.9%

F

+2.0%

+2.4%

TSLA

+6.7%

+25.1%

TM

+0.3%

-3.1%

HMC

+0.2%

+8.6%

HOG

+0.8%

+5.6%

AAP

+0.7%

+2.2%

AZO

-0.2%

-6.3%

Auto-Tires-Trucks Sector 5YR % Return

Auto-Tires-Trucks Sector 5YR % Return

What’s Next in the Auto Space?

In the fourth-quarter earnings season currently underway, Tesla and Advance Auto Parts, Inc. AAP, among other automakers, are expected to report in the coming week.

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