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Steer Clear of The Car ETF After Mixed Auto Stock Earnings - ETF News And Commentary

Benzinga.com
0 Comments| August 11, 2014

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After a bleak start to the year, the U.S. auto industry has been seeing robust sales over the past few months. Bigger sales incentives and cheaper credit seem to be the main factors behind the uptick in sales. This in turn has increased the sector's contribution to the economy.

However, the sector still needs to impress investors on the earnings front. This is especially true as earnings for the auto sector's total market capitalization are down 7.7% from the same period last year. However, this is far better than the prior-quarter earnings fall of 22.1%.

Nonetheless, revenues have inched up marginally by 2.9% year over year, with just 20% beating revenue expectations (read: Are Auto ETFs Headed for Trouble Despite Robust July Sales?)

Most of the big auto companies including Ford Motor Co. (F), General Motors (GM) and Honda Motor (HMC) are down 4% to 6% following their earnings releases.

Below we have highlighted in detail the earnings of some of the major auto companies that have reported recently.

General Motors Earnings

The largest U.S. automaker missed our estimates on both fronts. The company posted a 31% year-over-year drop in earnings per share to 58 cents, missing the Zacks Consensus Estimate of 78 cents. Though revenues in the quarter grew 1.5% year over year to $39.6 billion, it lagged the Zacks Consensus Estimate of $40.8 billion.

The company's bottom line was primararily impacted by recall related costs. GM expects to spend $400 million to compensate victims of ignition-switch defects.

Ford Earnings

This second-largest carmaker by sales reported a year-over-year drop in both earnings and revenues, though the company managed to beat our estimates ...

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