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Strong General Motors Earnings Put Auto ETF in Focus - ETF News And Commentary

The largest U.S. automaker General Motors (GM) has reported impressive adjusted earnings for the second quarter of 2015 buoyed by strong sales of North American truck and better performance in China - the world's largest car market (read: 3 Sector ETFs to Profit from Q2 Earnings ).

Earnings in Details

The company recorded adjusted earnings of $2.2 billion or $1.29 per share in the second quarter of 2015, beating the Zacks Consensus Estimate of $1.08. Net income (on a reported basis) doubled in the second quarter to $1.1 billion or 67 cents per share, compared with $0.2 billion or 11 cents per share in the year-ago quarter. Recalls and quality concerns had weighed on first-quarter earnings.

Revenues in the reported quarter, however, declined 3.5% year over year to $38.2 billion and missed the Zacks Consensus Estimate of $40.1 billion. The year-over-year decline in revenues was driven by an adverse foreign currency impact (read: ETFs to Play 3 Undervalued Sectors ).

The company's North American operations were the main driver of growth as profits in the region doubled to $2.8 billion from $1.4 billion in the second quarter of 2014. GM Europe ("GME") witnessed a 16.5% decline in revenues to $5 billion in the quarter. The region reported break-even results as against a loss of $0.3 billion in the year-ago quarter.

General Motors has posted a comparatively strong second-quarter operating margin of 10.2%, up from 10% a year ago in China on the back of strong sales of sport-utility vehicles (SUVs) that are increasingly popular there. This comes despite slowdown concerns in the country, wherein weaker demand and excess production capacity have led to a price war in some segments.

Moreover, the company expects a stronger second half on the back of a series of new SUVs that generate more profit than cars. These are expected to offset any further weakness in China (read: Auto Sales on Top Gear: ETFs & Stocks to Ride on ).

ETF Impact

General Motors' encouraging business in China and North America eased investors' nerves, pushing up the company's shares 4% higher in Thursday's trading session. As a result, the auto ETF - NASDAQ Global Auto Index Fund ( CARZ ) - which has a sizable exposure to General Motors also gained 0.45% yesterday. Below we have highlighted the auto ETF in details which could see some smooth trading ahead and also witness smart gains.

CARZ in Focus

The ETF tracks the Nasdaq OMX Global Auto Index, giving investors exposure to automobile manufacturers across the globe. The product holds 37 stocks in the basket with General Motors among the top five holdings with 7.56% exposure. Daimler takes the top spot followed by Ford Motor ( F ) and Toyota Motor ( TM ), each with above 8% exposure.

In terms of country exposure, Japan takes the top spot at 36% while the U.S. takes the second spot with 24.1% allocation, followed by a 19.9% exposure to Germany (see all Consumer Discretionary ETFs here ).

The ETF is unpopular with $32.3 million in its asset base and sees light trading volume. The product seems to be slightly expensive with 70 bps in annual fees and has a dividend yield of 1.54%. The fund has gained 1.9% in the year-to-date frame and currently has a Zacks ETF Rank #2 or Buy rating with a "High Risk" outlook.

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GENERAL MOTORS (GM): Free Stock Analysis Report

FORD MOTOR CO (F): Free Stock Analysis Report

FT-NDQ GL AUTO (CARZ): ETF Research Reports

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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.

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