Markets
GM

Auto Stock Roundup: Volkswagen Shocks, General Motors Settles Ignition Switch Case

The Volkswagen AG VLKAY scandal shook the auto sector as well as the U.S. market last week. While the German automaker's stock took a plunge, the controversy pulled down the stocks of its suppliers and peers as well.

In another major development, General Motors Company GM reached a $900 million settlement in the ignition switch case. Any action on the charges against the company will be deferred for 3 years and may even be dismissed if it manages to fulfill the settlement terms.

Meanwhile, Tesla Motors, Inc. TSLA signed another agreement to purchase lithium hydroxide for its Gigafactory. Further, AutoZone, Inc. AZO and Thor Industries Inc. THO reported fourth-quarter results.

(Read last to last week's recap here: Auto Stock Roundup for Sep 17, 2015 )

Recap of the Week's Most Important Stories

1. The Environmental Protection Agency (EPA) revealed that Volkswagen had developed a software algorithm which allowed it to deceive U.S. emissions tests. The software switches on pollution controls during emission tests but switches them off when the vehicle is on road. The company has accepted that its diesel vehicles in the U.S. are fitted with the software. The relevant vehicles include Jetta, Beetle, Audi A3 and Golf from model years 2009-2015 and Passat of model years 2014 and 2015. (Read more: Volkswagen Recalled Vehicles in April to Fix Emission Issue ).

According to the EPA, the Volkswagen vehicles in question emit nitrogen oxides, or NOx, at almost 40 times the standard amount. Consequently, Volkswagen has been forced to halt the sale of its popular diesel-powered vehicles in the U.S. Many other countries have also started investigating whether Volkswagen uses similar tactics to deceive their respective emission tests (read more: Will Volkswagen's Software Trick Hurt the Auto Industry? ).

2. General Motors announced a settlement over the ignition switch issue with the U.S. Attorney's Office for the Southern District of New York. The company was charged for not disclosing safety concerns related to the faulty ignition switches to regulators, thereby misleading consumers. The automaker signed a deferred-prosecution agreement as part of the settlement.

Per the terms laid down, General Motors will have to cooperate with the federal government which will create an independent monitor to analyze the automaker's policies and procedures associated with safety issues and recalls. The company will also have to pay a fine of $900 million, which is likely to be reflected in its third-quarter results (read more: GM & Regulators Reach Settlement on Ignition Switch Case ).

3. Tesla has signed an agreement with Pure Energy Minerals to purchase lithium hydroxide produced from the Clayton Valley, Nevada Lithium Brine Project of the latter. However, the deal is subject to fulfillment of certain terms by Pure Energy Minerals. Moreover, Pure Energy Minerals will conduct a preliminary economic assessment to gauge the viability of the mining operation.

Subject to the fulfillment of these terms, Tesla or its authorized purchasers will buy a specified amount of lithium hydroxide from Pure Energy Minerals over a five-year period at a set price, which is below the current market rate (read more: Tesla Looks to Secure Lithium Supply with New Deal ).

4. AutoZone reported a 13% rise in earnings per share to $12.75 for the fourth quarter of fiscal 2015 (ended Aug 29, 2015) from $11.28 recorded in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of $12.67. Quarterly revenues improved 7.9% year over year to $3.29 billion, beating the Zacks Consensus Estimate of $3.25 billion (read more: AutoZone's Q4 Earnings, Revenues Beat Estimates ).

5. Thor Industries reported fourth-quarter fiscal 2015 (ended Jul 31, 2015) adjusted earnings of $1.14 per share that missed the Zacks Consensus Estimate of $1.32. Meanwhile, adjusted earnings increased from $1.13 per share recorded in the fourth quarter of fiscal 2014. Revenues rose 2% year over year to $1.06 billion, lagging the Zacks Consensus Estimate of $1.16 billion. The year-over-year improvement in the top line was driven by the addition of revenues from Postle, acquired earlier this year, which offset the lower sales of both towable and motorized recreational vehicles.

Performance

Most auto stocks recorded losses over the week due to collateral damage from the Volkswagen scandal. Ford Motor Co. F lost the maximum value among the stocks listed below, while AutoZone was the sole gainer due to its solid fourth-quarter results.

Meanwhile, Tesla remained the biggest gainer over the last six-month period and General Motors was the worst performer with 21.5% loss.

Company Last 1-Week Period Last 6 Months
GM -4.7% -21.5%
F -6.6% -17.4%
TSLA -0.5% +29.4%
TM -3.7% -18.7%
HMC -4.2% -9.6%
HOG -5.1% -12.9%
AAP -1.5% +16.5%
AZO +1.8% +11.8%

What's Next in the Auto Space?

On Sep 29, 2015, Tesla will host a launch event at its Fremont plant to mark the first deliveries of the long-awaited Model X.

On the same day, General Motors will pay a quarterly cash dividend of 36 cents per share to shareholders of record as of Sep 14. Harley-Davidson, Inc. HOG will also pay a quarterly cash dividend of 31 cents per share on Sep 25, 2015, to shareholders of record as of Sep 15.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

FORD MOTOR CO (F): Free Stock Analysis Report

THOR INDS INC (THO): Free Stock Analysis Report

HARLEY-DAVIDSON (HOG): Free Stock Analysis Report

AUTOZONE INC (AZO): Free Stock Analysis Report

GENERAL MOTORS (GM): Free Stock Analysis Report

VOLKSWAGEN-ADR (VLKAY): Free Stock Analysis Report

TESLA MOTORS (TSLA): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

GM F HOG AZO THO

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More