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Harley-Davidson Inc.

Exchange: New York Stock Exchange | Oct 20, 2018, 2:55 AM EDT

$ 39.57 Change Down
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Day Low 38.74
Day High 40.02

Auto Stocks Reporting Q3 Earnings on Oct 26: F, LKQ, BWA

With several companies releasing their quarterly results in a row, a few automakers, namely Harley-Davidson, Inc. HOG, General Motors Company GM and PACCAR, Inc. PCAR also recently reported third-quarter figures. While Harley-Davidson’s earnings per share came in line with the Zacks Consensus Estimate, both General Motors’ and PACCAR’s bottom lines beat the estimates.

Three important auto and parts manufacturers, expected to come up with their earnings numbers on Oct 26 are, Ford Motor Company F, LKQ Corporation LKQ and BorgWarner Inc. BWA.

As of Oct 18, per the latest Earnings Outlook, 52 S&P 500 members have already revealed their quarterly earnings results. Of these companies, the beat ratios of earnings and revenues are 76.9% and 73.1%, respectively. From the Auto sector, 10% has reported quarterly earnings figures.

For third-quarter 2017, earnings and revenue growth for the auto companies is expected to be more on the negative side. The sector is expected to record 17.4% and 5.6% year-over-year decline in earnings and revenues, respectively. However, companies under the S&P 500 category will come up with 3% and 4.9% year-over-year growth in earnings and revenues, respectively.

In order to tackle air pollution problems, many countries are focusing on use of electric cars. This new paradigm shift has prompted many automakers to transfer their attention from gasoline and diesel-automobiles to electric cars. With this move, the companies have to balance current strategies as well as invest in future industrial trends and changes.

Let’s take a look at the three auto companies, scheduled to announce results on Oct 26.

We relied on the Zacks methodology, combining a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) with a positive Earnings ESP, to predict the chances of an earnings beat this quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Per our proprietary methodology, Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Research shows that with this ideal combination of two key ingredients — Zacks Rank and ESP — chances of a positive earnings surprise are as high as 70% for the stocks lined up for an earnings announcement.

A multinational automaker, headquartered in Dearborn, MI, Ford manufactures and distributes automobiles in 200 markets across six continents. Our model predicts that the company is not likely to deliver an earnings beat as it currently has an Earnings ESP of -9.43% and a Zacks Rank #4 (Sell). Therefore, we caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

In 2017, the company expects the adjusted EPS to be in the range of $1.65-$1.85. Also, the company’s frequent vehicle recalls to fix safety issues is increasing the capital expenditure. (Read more: Ford Motor Set to Report Q3 Earnings: What's in Store?)

Ford Motor Company Price and EPS Surprise

Chicago, IL-based LKQ Corporation is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles. Our model does not conclusively predict that the company is likely to beat estimates this quarter as it currently has an Earnings ESP of 0.00% and a Zacks Rank #3. Although the bullish rank increases the predictive power of ESP, the company’s 0.00% ESP however, makes surprise prediction difficult.

The company expects organic sales growth in the 4-5.25% range compared with the earlier guided range of 4-6%, in 2017. This is majorly due to the acquisition of Andrew Page that is affecting its gross margin. However, its effort to lower the operational costs as well as the capital expenditure within $200-$225 million range might drive its results. (Read more: Will Declining Costs Drive LKQ's Results in Q3 Earnings?)

LKQ Corporation Price and EPS Surprise

Michigan-based BorgWarner is a leading manufacturer of powertrain products for major automakers. Currently, the company carries an Earnings ESP of 0.00% and a Zacks Rank #2. Our model does not conclusively predict that the company is likely to deliver a positive earnings surprise this quarter.

In third-quarter 2017, the company expects earnings per share to be within the range of 84-87 cents, higher than 78 cents in the year-ago period. Organic net sales growth for the quarter is projected in the 3-6% band. (Read more: BorgWarner to Report Q3 Earnings: What's in Store?)

BorgWarner Inc. Price and EPS Surprise

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