The auto sector’s performance has been below expectations so far in Q4 earnings. The 80% of the companies that have reported in the sector recorded a 21% year-over-year decline in earnings while revenues rose 2.1%, per our latest Earnings Outlook. In comparison, the 375 S&P 500 companies that had reported through Feb 15 posted 7.2% growth in earnings and a 4.6% rise in revenues.
The weak performance is expected to continue for the auto sector till the end of this earnings season. By the end of Q4, auto sector earnings are projected to decline 20% while revenues are expected to inch up 0.2%. Meanwhile, total S&P 500 earnings and revenues are expected to increase 7.4% and 3.9% year over year, respectively.
Safety recalls and related costs have turned out to be a major issue for most automakers in recent years. Recall-related repair costs have increased their financial burden. The pressure to maintain attractive incentives and deals to boost volumes is also straining their margins and profits. Further, the adverse impact of foreign currency translation remains a headwind for many companies.
Meanwhile, strong sales growth in the key markets of U.S., China and Europe has been the primary driving factor for the auto sector in Q4. Also, low fuel prices boosted the sales of higher margin vehicle segments, such as SUVs and light trucks. With these factors in mind, let’s see what awaits these two auto stocks that are scheduled to release their fourth-quarter 2016 results on Feb 17.
Cooper Tire & Rubber Co. CTB has an Earnings ESP of -1.08% as the Most Accurate estimate is pegged at 92 cents while the Zacks Consensus Estimate stands at 93 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Cooper Tire carries a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The company beat earnings in each of the trailing four quarters, thus delivering a positive average surprise of 17.28% over this period (read more: Cooper Tire Q4 Earnings: Stock Set to Disappoint?).
Cooper Tire & Rubber Company Price and EPS Surprise
WABCO Holdings Inc. WBC has an Earnings ESP of +2.08% as the Most Accurate estimate is pegged at $1.47 while the Zacks Consensus Estimate is $1.44. WABCO’s positive ESP and a Zacks Rank #3 (Hold) makes us reasonably confident about an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company beat earnings in each of the trailing four quarters, delivering a positive average surprise of 3.57%.
Wabco Holdings Inc. Price and EPS Surprise
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