Auto Stock Roundup: Ford's $2.2B Pre-Tax Charge, Fiat-Foxconn JV & More

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Auto recalls have been on the rise in recent years and the issue is unlikely to abate anytime soon. Three Japan-based auto giants — Toyota Motor TM, Honda Motor HMC and Nissan Motor NSANY — recently issued massive recalls over airbag woes. Toyota issued a recall of 3.4 million vehicles on a worldwide basis due to an electronic defect that could lead to problem in deployment of air bags in crashes. The recall, which covers 2.9 million U.S. vehicles, will include Corolla 2011-2019, Matrix 2011-2013, Avalon 2012-2018 and Avalon Hybrid vehicles 2013-2018.

Honda and Nissan also made a vehicle recall announcement in order to replace the risky Takata airbag inflators that could blow apart a metal canister, and hurl shrapnel at drivers and passengers. While Honda is set to recall about 2.7 million vehicles in the United States and Canada, Nissan will recall 346,000 vehicles worldwide.

Ford’s $2.2-billion pre-tax charge, Magna International’s 2020-2022 outlook and Fiat-Foxconn JV were the other highlights of the week. Meanwhile, Tesla moved a step closer to open its first European Gigafactory with the German property deal. Tesla currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

(Read the Last Auto Stock Roundup here).

Recap of the Week’s Most Important Stories

Ford F announced that it expects to be hit by a pre-tax loss of about $2.2 billion in fourth-quarter 2019, due to pension and other post-retirement employee benefits (OPEB) obligations. The $2.2-billion loss is projected to reduce Ford's net income by around $1.7 billion, after taxes. It includes a loss of $2 billion related to pension plans outside the United States and a $600-million loss associated with global OPEB plans, offset by a $400-million benefit associated with U.S. pension plans. However, since it is a special item, the loss will not affect the adjusted profit or the adjusted profit per share. It also did not have an impact on the company's cash in 2019, and did not change its expectations for pension contributions in 2020. (Read more: Ford to Incur $2.2B Pre-Tax Loss in Q4 Over Pension Plans)

Magna MGA provided financial outlook for 2020 and 2022. Strengthening U.S. dollar and production cuts by automakers across Europe are likely to weigh on its top line in 2020. The firm forecasts 2020 sales in the band of $38-$40 billion compared with the 2019 guided range of $38.7-$39.8 billion. Nonetheless,the company does not anticipate a fall in profit margins.Net income for 2020 is expected between $1.8 billion and $2 billion compared with 2019 guided range of $1.8-$1.9 billion. Further, Magna expects sales and EBIT margin growth in 2022 on the back of product launches and business expansion efforts. Revenues and EBIT margin for 2022 are anticipated in the band of $40.5-$43.5 billion and 7.6-8%, respectively, suggesting an uptick from 2020. During the 2020-2022 timeframe, Magna forecasts to generate $5.5 billion of free cash flow. (Read more: Magna Outlines 2020-2022 Outlook: What Investors Need to Know)

Fiat Chrysler Automobiles N.V. FCAU recently announced plans to establish a 50-50 joint venture (JV) with Foxconn, in a bid to develop and manufacture next-gen battery electric vehicles (EV) in China and engage in the IoV, or' ‘Internet of Vehicles’ business. The JV will enable both parties to pool the expertise of the two global leaders across the spectrum of automotive design, engineering and manufacturing, and mobile software technology to concentrate on the growing battery EV market. Therefore, the tie-up would be one of the most significant moves by Fiat Chrysler to market EVs in China, where automakers are investing in battery-powered cars to meet government regulations. (Read more: Fiat Chrysler & Foxconn Sign 50-50 Merger Agreement)

Toyota Motor will make an investment of $394 million in the U.S. start-up, Joby Aviation, which engages in the production of all-electric vertical take-off and landing aircraft (eVTOL) for urban transportation services.Toyota, alongside Baillie Gifford and Global Oryx and other investors, is the lead investor in Joby Aviation's $590-million Series C financing. It will work with Joby Aviation to design and build a fleet of eVTOL for use in a ride-hailing service.The prototype aircraft, which looks like an enormous toy drone, features six electric propellers and is capable of flying 150 miles on a single charge, at speeds of up to 200 miles per hour. (Read more: Toyota to Invest $394M in Flying Taxi Start-Up Joby Aviation)

Tesla, Inc. TSLA announced plans to buy a 300-hectare property with a view of establishing its first Europe-based factory on the outskirts of Berlin. The agreement stipulates a tentative property price of 40.91 million euros (45.36 million dollars), which can be adjusted if a different value is offered by an external evaluation. The facility will include a design and engineering center, which will be used to produce cars, batteries and powertrains. Tesla is reportedly building Model 3 and Model Y vehicles on site, and aims to begin production in 2021. This move, expected to create up to 7,000 jobs in Brandenburg, has been welcomed by politicians, unions and industry groups. (Read more: Tesla to Build 300-Hectare European Factory in Berlin)

Price Performance

The following table shows the price movement of some of the major auto players over the past week and six-month period.

In the past week, Tesla has recorded the maximum gain, while Advance Auto Partshas registered the maximum loss. Even in the past six months, Tesla has gained the most, while General Motors has recorded the maximum decline.

Company

Last Week

Last 6 Months

GM

-1.8%

-14.6%

F

-0.1%

-11.3%

TSLA

10.9%

115%

TM

1.1%

6.4%

HMC

-0.7%

4.1%

HOG

-1.6%

-1.5%

AAP

-2.8%

-6.9%

AZO

1.4%

-1.3%

What’s Next in the Auto Space?

Investors will be keenly awaiting fourth-quarter 2019 earnings reports of a host of auto companies, including motorcycle maker Harley-Davidson, truck manufacturer PACCAR and EV pioneer Tesla, scheduled to release next week.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


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Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Ford Motor Company (F) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
Nissan Motor Co. (NSANY) : Free Stock Analysis Report
 
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
Magna International Inc. (MGA) : Free Stock Analysis Report
 
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