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4 Foreign Auto Stocks to Buy Ahead of Q3 Earnings

Zacks

The third-quarter 2017 earnings season has already started. About 5% of the S&P 500 companies have come up with their results for the quarter ending on Sep 30. However, for the auto sector, which is presently facing myriad challenges, earnings season will begin next week.

Per the latest Earnings Trends, only 22 companies from the S&P 500 category have reported earnings results, with year-over-year earnings and revenues growth rate of 27.1% and 7.3%, respectively. No company from the Zacks Auto sector has reported third-quarter 2017 results yet.

The S&P 500 companies are expected to report year-over-year earnings and revenues growth of 2.3% and 5%, respectively. However, for the Zacks Auto sector, the projected picture for third-quarter 2017 is not at all rosy with year-over-year earnings and revenues growth projection of -18.2% and -2.3%, respectively.

Despite auto sales rising in September, prompted by high demand for replacement of damaged or destroyed vehicles due to the impact of hurricanes Harvey and Irma, the problems affecting the sector still persist. In fact, auto companies are witnessing a dramatic shift in their operations.

The intensity at which consumers’ preferences are changing, has prodded a number of automakers to reorient their strategies. Added to this is the necessity of manufacturing electric and green vehicles, which will surely bring numerous changes in the industry. Moreover, in order to lure customers and lower inventories, auto manufacturers are offering huge discounts, thereby straining their profit margins.

That said, currently, in terms of Zacks Industry Rank, the Zacks Automotive-Foreign industry is better placed than the Zacks Automotive-Domestic industry. The Zacks Automotive-Foreign industry is currently among the top 5% of the 256 Zacks-Ranked industries, whereas Zacks Automotive-Domestic industry is among the top 14% of the 256 Zacks-Ranked industries.

Stock Picking Criteria

Given that the Zacks Automotive-Foreign industry has a slight edge over the Zacks Automotive-Domestic industry, here we have zeroed in on the stocks hailing from the former category. Only Buy-rated stocks with a VGM Score of less than or equal to B have been selected. Here are our four finds.

Japanese Toyota Motor Corporation TM is one of the leading automakers in the world in terms of sales and production. Currently, Toyota sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. The company has an expected long-term earnings growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stuttgart, Germany-based Daimler AG DDAIF is a leading producer of premium passenger cars and the largest manufacturer of commercial vehicles in the world. Daimler has a Zacks Rank #2 (Buy) and has a VGM Score of B. The company has an expected long-term earnings growth rate of 2.8%.

Hong Kong-based Geely Automobile Holdings Limited GELYY is an automobile manufacturer primarily in the Peoples Republic of China. Geely Automobile sports a Zacks Rank #1 and has a VGM Score of B. The company has an expected long-term earnings growth rate of 29%.

Wuhan, China-based Dongfeng Motor Group Company Limited DNFGY is engaged in the manufacture and sale of commercial vehicles. Dongfeng Motor Group sports a Zacks Rank #1 and has a VGM Score of B. The company has an expected long-term earnings growth rate of 11%.

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