The Zacks Analyst Blog Highlights Toyota, Honda BorgWarner, O’Reilly Automotive and Cummins

For Immediate Release

Chicago, IL – February 15, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Toyota TM, Honda HMC, BorgWarner Inc. BWA, O’Reilly Automotive, Inc. ORLY and Cummins Inc. CMI.

Here are highlights from Tuesday’s Analyst Blog:

Auto Roundup: Q4 Earnings Edition

China Association of Automobile Manufacturers (CAAM) released vehicle production and sales data for January 2023. Last month, a total of 1.594 million units of vehicles were manufactured in China, per CAAM. This marked a 33.3% decline month over month and a 34.3% decline year over year.

Total car sales during the month were 1.649 million units, down 35% year over year. Passenger car sales were down 32.9% to 1.469 million units, while commercial vehicles were down 23.9% to 180,000 units. Last month, sales of new energy vehicles (NEVs) totaled 408,000 units, up 6.3% year over year but plunged around 50% from December 2022 levels.

On the news front, Japan-based auto giants Toyota and Honda came out with their quarterly results, wherein both topped earnings estimates. Auto equipment provider BorgWarner Inc. delivered a comprehensive beat and also witnessed an uptick in the top and bottom lines. Auto parts retailer, O’Reilly Automotive, Inc. surpassed fourth-quarter earnings expectations on spectacular top-line growth led by robust comps.Leading truck engine maker Cummins Inc. failed to deliver an earnings beat in the fourth quarter of 2022 but saw its EPS jump 58.5% on a yearly basis.

While CMI currently carries a Zacks Rank #4 (Sell), ORLY, BWA, TM and HMC are #3 Ranked (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inside the Headlines

BorgWarner reported adjusted earnings of $1.26 per share for fourth-quarter 2022, up from $1.06 recorded in the prior-year quarter. The bottom line also beat the Zacks Consensus Estimate of $1.04 per share. Higher-than-anticipated revenues across e-Propulsion & Drivetrain, Fuel-System and Aftermarket segments resulted in the outperformance. The automotive equipment supplier reported net sales of $4,108 million, outpacing the Zacks Consensus Estimate of $3,892 million. The top line also moved up 12.4% year over year.

For full-year 2023, the company anticipates net sales within $16.7-$17.5 billion, indicating year-over-year growth of 7-12%. Importantly, BorgWarner envisions electric vehicle revenues of around $1.5 billion-$1.8 billion for 2023, markedly up from $870 million in 2022. Adjusted operating margin is expected in the band of 8.6-9%. Adjusted net earnings are estimated to be within $4.5-$5 per share. Free cash flow is projected in the band of $550-$650 million. (BorgWarner’s Q4 Earnings Surpass Estimates, Rise Y/Y)

O’Reilly reported fourth-quarter 2022 adjusted earnings per share of $8.37, beating the Zacks Consensus Estimate of $7.71. Higher-than-expected comps growth resulted in the outperformance. Comps grew 9% in the reported quarter and topped the Zacks Consensus Estimate of 4.07%. The bottom line increased 10% from $7.64 in the prior-year quarter. The automotive parts retailer registered quarterly revenues of $3.64 billion, crossing the consensus mark of $3.51 billion. The top line was 11% higher than the prior-year figure of $3.29 million. During the quarter, the company opened 20 new stores in the United States and 14 in Mexico. The total store count was 5,971 as of Dec 31, 2022.

For 2023, total revenues are expected to be in the range of $15.2-$15.5 billion. Earnings per share are expected between $35.75 and $36.25. The forecast for comparable store sales growth is in the range of 4-6%. The free cash flow projection is in the band of $1.8-$2.1 billion. Capital expenditures are expected within the range of $750-$800 million. The company intends to open 180-190 stores this year. (O’Reilly Q4 Earnings & Revenues Beat on Strong Growth)

Cummins reported fourth-quarter 2022 earnings of $4.52 per share, which reflects a substantial improvement from the prior-year quarter of $2.85 per share. But the figure missed the Zacks Consensus Estimate of $4.66. Weaker-than-expected EBITDA in the Engine, Components and New Power segments resulted in the underperformance. Cummins’ revenues totaled $7.8 billion, up 32.8% from $5.9 billion recorded in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $7.4 billion.

During FY2022, Cummins maintained its streak of increasing cash dividends for the 13^th consecutive year. It spent a total of $1.2 billion in dividends and share repurchases in 2022. Cummins expects revenues to grow in the range of 12%-17% year over year. EBITDA is forecast in the range of 14.5%-15.2% of sales. Cummins continues to stick to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends and share repurchases. (Cummins’ Q4 Earnings Miss Estimates, Surge Y/Y)

Toyota posted third-quarter fiscal 2023 earnings of $3.78 per share, which surpassed the consensus mark of $3.66. The bottom line, however, declined from the year-ago earnings of $5.03 a share. Consolidated revenues came in at $69,161 million, beating the consensus mark of $68,126 million and rising from $68,530 million in the year-ago reported figure. Toyota had cash and cash equivalents of ¥6.02 trillion ($45.9 billion) as of Dec 31, 2022. Long-term debt was ¥16.56 trillion ($126.3 billion).

For fiscal 2023, Toyota projects consolidated vehicle sales of 8.8 million, indicating an increase from 8.23 million units sold in fiscal 2022. Fiscal 2023 sales are expected to total ¥36 trillion, implying an increase from ¥31.4 trillion recorded in fiscal 2022.

Operating income is projected to be ¥2.4 trillion, indicating a decline of 19.9% year over year. Pretax profit is estimated at ¥3.34 trillion, down from ¥4 trillion generated in fiscal 2022. R&D expenses are envisioned to be ¥1,200 billion, suggesting a rise from ¥1,124 billion spent in fiscal 2022. Capex is forecast at ¥1.54 trillion, signaling an uptick from ¥1.34 trillion spent in fiscal 2022. (Toyota Q3 Earnings Surpass Estimates, Fall 25% Y/Y)

Honda reported earnings of $1.02 per share for third-quarter fiscal 2023, beating the Zacks Consensus Estimate of 95 cents. The bottom line also grew from the year-ago profit of 99 cents per share. Quarterly revenues totaled $31,467 million, lagging the Zacks Consensus Estimate of $33,016 million. The top line also inched down from $32,469 million recorded in the year-ago period. Consolidated cash and cash equivalents were ¥3.59 trillion ($27.4 billion) as of Dec 31, 2022. Long-term debt was ¥4.37 trillion ($33.35 billion).

Honda projects fiscal 2023 sales volumes from Motorcycle, Automobile and Power Products segments to be 18.73 million units, 3.85 million units and 5.58 million units in fiscal 2023, compared with the prior estimates of 18.43 million units, 4.1 million units and 5.66 million units, respectively. For fiscal 2023, Honda forecasts revenues of ¥17.25 trillion, indicating an uptick of 18.5% year over year.

Operating profit is envisioned at ¥870 billion, almost flat with fiscal 2022. Pretax profit is forecast at ¥1,080 billion. The company’s R&D expenses for fiscal 2023 are likely to be ¥860 billion, suggesting a rise from ¥804 billion spent in fiscal 2022. Capex is envisioned at ¥550 billion, indicating a jump from ¥278.4 billion recorded in fiscal 2022. (Honda Q3 Earnings Beat Estimates, Increase 3% Y/Y)

What’s Next in the Auto Space?

Industry watchers will keep a tab on January passenger vehicle registrations to be released by the European Automobile Manufacturers’ Association. Also, stay tuned for the quarterly releases of auto retailers like Sonic Automotive, Lithia Motors and AutoNation, which are scheduled to report this week.

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