Key Predictions for Q1 Earnings Reports of F, HOG & ORLY

The first-quarter earnings season for the Auto-Tires-Trucks sector kicked off last week. So far this earnings season, three S&P sector components, namely Tesla TSLA, Genuine Parts Company GPC and PACCAR Inc. PCAR, have come up with quarterly numbers. Despite the industry odds, all three companies not only managed to pull off a comprehensive beat but also witnessed year-over-year growth in the top and bottom lines.

A Quick Glance at TSLA, GPC & PCAR’s Q1 Numbers

Electric vehicle behemoth Tesla delivered yet another blockbuster show, posting an earnings beat for the fifth straight quarter. TSLA’s first-quarter 2022 earnings of $3.22 a share rose significantly from the year-ago figure of 93 cents and surpassed the Zacks Consensus Estimate of $2.15. Total revenues came in at $18,756 million, beating the consensus mark of $17,276 million. The top line also witnessed year-over-year growth of 80.5%. Importantly, TSLA reported an automotive gross margin of 32.9% and overall gross margin of 29.1% for the quarter.

Auto replacement parts provider Genuine Parts reported first-quarter 2022 adjusted earnings of $1.86 per share, up 24% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.70 per share. Higher-than-expected sales and operating profits across both its segments resulted in this outperformance. The company reported net sales of $5,294.6 million, surpassing the Zacks Consensus Estimate of $5,131 million. The top line is also higher than the year-ago quarter’s $4,465 million.

Trucking giant PACCAR posted first-quarter 2022 adjusted earnings of $1.72 a share, outpacing the consensus mark of $1.51. The bottom line also rose 27.4% year over year. Higher-than-expected revenues from Trucks and Parts segments led to the outperformance. PCAR reported net sales of $6,472.6 million, beating the Zacks Consensus Estimate of $5,781 million and increasing from the year-ago figure of $5,845.5 million.

Factors Setting the Tone for Auto Stocks’ Q1 Results

First-quarter 2022 was difficult for the U.S. auto market. U.S. new vehicle sales declined more than 12% year over year for the January-March period due to escalating supply chain issues despite robust consumer demand. Sales plunged even more drastically in March as limited vehicle supply and tight inventories kept a lid on volumes amid rising COVID-19 cases and compounded chip concerns over the Russia-Ukraine crisis. 

While low sales volumes are likely to have a negative impact on first-quarter results, the rising prices of vehicles (both used and new) are expected to have offset the same to a large extent. Amid supply-demand mismatch and tight inventory levels, prices of new and used cars hit the roof. In the light of chip crunch, automakers have been prioritizing resources toward high-margin and more popular vehicles like electric cars. The rising deliveries of new energy vehicles (including all-electric, hybrids and fuel-cell) are expected to have fueled revenues.

All in all, while soaring commodity costs and limited vehicle supply amid the chip crunch are likely to negatively impact the upcoming results, the rising average price of vehicles and high deliveries of electric cars should have partly counterbalanced the headwinds.

Per the latest Earnings Trend report dated Apr 20, the auto sector’s earnings for Q1 are expected to decline 20.8% on a year-over-year basis. As for the revenues, they are estimated to edge up 8% year over year.

Key Releases on Apr 27

Ford F: This legacy automaker missed earnings estimates in the last reported quarter on lower-than-expected profits in North America and a pretax loss in Europe. Over the trailing four quarters, Ford surpassed earnings estimates on three occasions and missed once, with the average surprise being 179.3%. This is depicted in the graph below:

Ford Motor Company Price and EPS Surprise

Ford Motor Company price-eps-surprise | Ford Motor Company Quote

Our proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our proven model doesn’t conclusively predict an earnings beat for Ford this time around. This is because it has an Earnings ESP of -1.79% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for the company’s first-quarter earnings and revenues is pegged at 39 cents per share and $29.95 billion, respectively. F is set to report quarterly results after the closing bell.

Declining vehicle sales during first-quarter 2022 due to escalating supply chain issues aggravated by the Russia-Ukraine war are likely to weigh on Ford’s upcoming results. Chip woes kept a lid on vehicle supply despite robust demand. Consequently, Ford witnessed a 17% year-over-year fall in new vehicle sales in the United States during the January-March period. The Zacks Consensus Estimate for total automotive revenues is pegged at $31.9 billion, indicating a decline from $33.6 billion recorded in first-quarter 2021. High commodity costs, a tough labor market and logistical challenges are also likely to have played spoilsports. In its lastearnings call Ford warned that commodity inflation would limit the company’s profit levels in the near term. Amid lower revenues and high manufacturing and operating expenses, Ford is expected to have witnessed a decline in EBIT across various end-markets served.

Harley-Davidson HOG: This iconic motorcycle manufacturer posted fourth-quarter 2021 earnings against the consensus estimate of a loss per share. Higher-than-anticipated revenues from both Motorcycles & Related Products and Financial Services segments resulted in this outperformance. HOG surpassed the Zacks Consensus Estimate in the trailing four quarters, with the average being 78%. This is depicted in the graph below:

HarleyDavidson, Inc. Price and EPS Surprise

HarleyDavidson, Inc. price-eps-surprise | HarleyDavidson, Inc. Quote

Things are not looking up for Harley-Davidson this time around, as it carries a Zacks Rank #3 and an Earnings ESP of 0.00%. The Zacks Consensus Estimate for first-quarter earnings and revenues is pegged at $1.52 a share and $1.34 billion, respectively.

Harley-Davidson has been battling severe supply-chain disruptions amid the global microchip shortage, which is likely to have dented the firm’s production and shipments in the to-be-reported quarter. Evidently, the Zacks Consensus Estimate for worldwide retail sales is pegged at 44,192 units, implying a decline from 44,234 units sold in first-quarter 2021.

Nonetheless, the Zacks Consensus Estimate for revenues from the Motorcycles and Related Products segment — which constitutes bulk of the firm’s overall revenues — is pegged at $1,332 million for the March-end quarter, suggesting an increase from the $1,232 million reported in the year-ago quarter. Also, the consensus mark for operating income from the segment is pegged at $241 million, suggesting growth from the profit of $228 million recorded in the corresponding quarter of 2021. On the flip side, The Zacks Consensus Estimate for operating income from Financial Services is pegged at $78 million, depicting a drop from $119 million generated in the comparable year-ago period.

O’Reilly Automotive ORLY: This U.S.-based specialty retailer of automotive parts came up with better-than-anticipated results in the last reported quarter on the back of remarkable growth in comparable-store sales. Over the trailing four quarters, the company surpassed earnings estimates on all occasions, with the average being 22.2%. This is depicted in the graph below:

O'Reilly Automotive, Inc. Price and EPS Surprise

O'Reilly Automotive, Inc. price-eps-surprise | O'Reilly Automotive, Inc. Quote

Investors expect ORLY to maintain its beat run and our model also predicts the same. This is because the company has an Earnings ESP of +7.07% and a Zacks Rank #3. The Zacks Consensus Estimate for first-quarter earnings and revenues is pegged at $7.43 per share and $3.29 billion, respectively.

Robust demand for vehicles is likely to have supported the sales of O’Reilly’s products and services. ORLY’s wide-ranging product portfolio serving the Do-it-Yourself and Do-it-for-Me customers provides the company with a competitive edge and is anticipated to have fueled comparable-store sales growth during the first quarter. This, in turn, is likely to have buoyed O’Reilly’s top line during the January-March period.

Further, O’Reilly’s customer-centric business model and surging demand for technologically-advanced auto parts are likely to have bolstered sales during the March-end quarter. Robust digitization efforts are also likely to have boosted the company’s performance during the quarter in discussion. ORLY is also likely to have gained from the opening of new stores and distribution centers in profitable regions during the to-be-reported quarter. ORLY’s upbeat full-year 2022 earnings and sales outlook also instills optimism for the to-be-reported quarter. 

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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