Auto Stock Roundup: TM Invests in Pony.ai, ADNT Trims View & More

Zacks Equity Research

The Automotive industry is grappling with the coronavirus outbreak in China. Hit by disruption caused by the coronavirus epidemic, the China Association of Automobile Manufacturers now forecasts the country’s auto sales to dip more than 10% in the first half of the year and 5% during the full year. Although the country’s operations are gradually restarting, carmakers are likely to struggle to boost output. The impact of coronavirus is getting felt beyond China’s borders, as various auto companies are halting operations amid shortage of supplies from China.

On the earnings front, Cooper Tire & Rubber Company and Cooper-Standard Holdings came up with quarterly numbers this week. While Cooper Tire & Rubber beat earnings estimates, Cooper-Standard Holdings recorded wider-than-expected loss in the fourth quarter of 2019.

(Read the Last Auto Stock Roundup here)

Recap of the Week’s Most Important Stories

1. Toyota Motor TM announced its plans to invest $400 million into Pony.ai, a self-driving car start-up, marking its biggest investment in an autonomous driving company based in China. Reportedly, Pony.ai has raised $462 million in a Series B funding round, out of which $400 million comes from Toyota. The latest fundraising values Pony.ai, at slightly more than $3 billion. The new funding will benefit Pony.ai's future robotaxi operations and development of technology at Pony.ai. Toyota already supports Pony.ai and in 2019, the two companies started a pilot program to test self-driving vehicles in China together. A range of mobility products and services are planned to be ‘co-developed’ by the businesses, going forward. Toyota currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Adient plc ADNT trimmed its 2020 guidance amid coronavirus fears. The company anticipates 2020 adjusted EBITDA to be at the lower end of the guided range of $870-$910 million, dented by the Coronavirus outbreak. Equity income is now anticipated between $175 million and $185 million compared with the prior guidance of $235-$245 million. Meanwhile, operational improvements in Americas and Europe, the Middle East and Africa are likely to continue this year, partially negating the $70-million headwind in China. (Read more: Adient Trims 2020 Outlook on Coronavirus Outbreak)

3. Tesla TSLA and Panasonic will be ending the joint production of solar cells at the Buffalo, NY-based Gigafactory 2 facility of the former, after struggling for years to boost the unit output. The latest move comes as another setback to their strained relationship. Per Panasonic, the company would cease production at Gigafactory 2 by the end of May 2020 and exit the factory by the end of September. The withdrawal comes as part of Panasonic’s strategy to divest unprofitable businesses in order to drive growth. Nevertheless, both the firms intend to continue working together on automotive batteries for Tesla's electric vehicles at Gigafactory 1 in Reno, NV. (Read more: Tesla & Panasonic to Abort Solar-Cell Production in New York)

4. Cooper Tire & Rubber CTB reported fourth-quarter 2019 adjusted earnings per share of $1.02 against the loss of 1 cent recorded in the prior-year period. The bottom line also surpassed the Zacks Consensus Estimate of 67 cents per share. The company’s net sales declined 2.6% year over year to $750 million in fourth-quarter 2019. The reported figure, however, surpassed the Zacks Consensus Estimate of $742 million. The company projects operating margin to improve in 2020 backed by a better second half and full-year margin to be higher than the 2019 figure of 6.3%. Capital expenditure is expected in the $260-$280 million band this year. The company expects higher manufacturing costs and SG&A expenses in first-quarter 2020. (Read more: Cooper Tire's Q4 Earnings & Revenues Beat Estimates)

5. Cooper-Standard Holdings CPS reported adjusted loss of $1.32 per share in fourth-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 59 cents, mainly due to lower revenues across all segments. The year-ago quarter’s profit was $1.47 per share. In the fourth quarter, the company generated revenues of $726 million, lower than the year-ago figure of $872 million. This downside mainly resulted from the UAW work stoppage in the United States and lower-than-planned volumes on certain vehicle programs. However, the revenue figure topped the Zacks Consensus Estimate of $694 million. For 2020, the company anticipates sales within $2.85-$3.05 billion. It expects adjusted EBITDA in the $150-185 million band and capital expenditure in the range of $140-$150 million. (Read more: Cooper-Standard Reports Loss in Q4, Beats on Revenues)

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, all auto stocks slid amid coronavirus crisis, with Tesla registering the maximum loss. In the past six months, Tesla has registered the maximum gain, while Ford has declined the most.

Company

Last Week

Last 6 Months

GM

-11.3%

-16.8%

F

-11.6%

-23.6%

TSLA

-24.6%

206.2%

TM

-5.5%

0.7%

HMC

-4.1%

10.4%

HOG

-11.4%

-0.8%

AAP

-4.6%

-2.9%

AZO

-5.9%

-9.8%

 

What’s Next in the Auto Space?

Car enthusiasts will be keeping a close watch on February 2020 U.S. car sales, which will be coming out early next week. Investors in the auto sector would be closely tracking the monthly sales reports of auto biggies like Honda Motor HMC, Hyundai and Toyota, among many others. They are keenly awaiting fiscal second-quarter 2020 earnings of AutoZone AZO.

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Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
Cooper Tire & Rubber Company (CTB) : Free Stock Analysis Report
 
AutoZone, Inc. (AZO) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Cooper-Standard Holdings Inc. (CPS) : Free Stock Analysis Report
 
Adient PLC (ADNT) : Free Stock Analysis Report
 
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