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GM, Fiat Chrysler Race ahead While Ford Lags in 2Q16

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Dec. 4 2020, Updated 10:52 a.m. ET

Auto industry’s 2Q16 earnings

The 2Q16 earnings season is nearly over, and most automakers (IYK) have reported their earnings for the quarter. The majority of the mainstream automakers, including General Motors (GM) and Fiat Chrysler (FCAU), reported solid earnings growth for the quarter.

However, Ford (F), the oldest US auto giant, reported marginal year-over-year growth of just 11% in 1Q16. Now, let’s take a look at investors’ reactions to the auto companies’ 2Q16 earnings.

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Earnings and stock market reaction

GM’s adjusted EPS (earnings per share) came in at $1.86 for the quarter. That’s 44% higher than its EPS of $1.29 in 2Q15. On the day of General Motors’ 2Q16 earnings release, its stock rose by 1.7% from the previous session. The company’s strong North American performance and high demand for pickup trucks and utility vehicles continued to drive its profitability in 2Q16.

Likewise, Fiat Chrysler reported solid adjusted EPS of 0.45 euros, or $0.51, about 55% higher than its adjusted EPS in 2Q15. However, FCAU’s stock dropped to close to 4.3% lower than its previous close on the day of its earnings release. Stagnation in the company’s 2Q16 revenues and shipments, along with concerns over the growth potential of auto demand in the US, could be what triggered this selling spree on Wall Street.

In 2Q16, Ford’s adjusted EPS came in at $0.52, 11% higher than the company’s earnings of $0.47 per share in the corresponding quarter of the previous year. On the day of its 2Q16 earnings release, Ford’s stock witnessed massive selling pressure and closed at $12.71, which was 8.2% lower than its previous close. The company’s shrinking profitability and challenges in meeting its 2016 guidance could be the primary factors that disappointed investors and triggered a selling spree.

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Tesla Motors (TSLA), the popular US electric carmaker, reported a non-GAAP[1. generally accepted accounting principles] net loss of $1.06 per share for the quarter, which is more than double the loss of $0.48 per share in 2Q15. Because Tesla is a new entrant in the US auto industry, we’ll cover GM, Ford, and Fiat Chrysler in this series for comparison.

Series overview

In this series, we’ll explore some of the key highlights of major auto companies’ 2Q16 earnings. This will include their revenues and margins. We’ll also look at analysts’ recommendations for automakers after their 2Q16 earnings releases.

Later in the series, we’ll explore how automakers’ stocks have fared so far in 3Q16. Finally, we’ll look at the companies’ valuation multiples.

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