Auto Roundup: HMC Quarterly Results, LOTZ-SFT Merger Plans and More – August 16, 2022

The China Association of Automobile Manufacturers (CAAM) released vehicle sales data for July. Vehicle sales in China rose 29.7% year-on-year to 2.42 million units, extending the June recovery thanks to the easing of COVID-induced restrictions as well as the stimulus packages offered by the government with the aim of reviving the market. Volumes, however, fell slightly from the 2.5 million units sold in June due to heat waves, which slowed the pace of production and hampered buyer visits to dealerships. According to CAAM, sales for the first seven months of 2022 contracted 2% year-on-year to 14.47 million units. In contrast, sales of new energy vehicles (NEVs) jumped about 115% year-on-year to 3,194,000 units between January and June. VEN sales jumped 117% to 593,000 units in July.

The Japanese automotive giant Honda (HMC Free Report) released its quarterly results, in which earnings beat estimates but revenue exceeded expectations. Encouragingly, the company raised its sales and earnings forecast. While the operating profit projection for fiscal 2023 still implies a decline on a yearly basis, it has been revised upward from 810 billion yen to 830 billion yen. automotive equipment supplier Westport Fuel Systems (WPRT Free Report) suffered a loss in the second quarter of 2022 amid a supply chain snafus and commodity price inflation.

Meanwhile, the American automaker Ford (F Free Report) has reopened the order book for its popular all-electric F-150 truck, but consumers will have to shell out more to own one. Given the rise in raw material prices, the company has raised prices for the electric truck on all trim levels.

Finally, the announcement of the merger of the online dealer of used vehicles Shift Technologies Inc. (SFT Free Report) and used vehicle depot company CarLotz, Inc. (LOTZ Free report) attracted a lot of attention. The merger is expected to be finalized in the fourth quarter of 2022, subject to approval by shareholders of both companies.

Important stories from the past week

Honda reported earnings of 67 per share for the first quarter of fiscal 2023, lagging Zacks’ consensus estimate of 79 cents. Net income also fell from earnings of $1.18 per share a year earlier. Quarterly revenue totaled $29,560 million, beating Zacks’ consensus estimate of $27,905 million. The top line, however, contracted 9.7% year on year. Consolidated cash and cash equivalents amounted to 3.63 trillion yen ($27.22 billion) as of June 30, 2022. Long-term debt was 5.01 trillion yen ($37.62 billion). dollars).

For fiscal 2023, Honda forecasts sales of 16.75 trillion yen, implying a 15% year-on-year increase. Operating profit is forecast at 830 billion yen, signaling a decline of 4.7% from fiscal 2022. Pre-tax profit is forecast at 1.040 billion yen, indicating a decline of 2.8% from one year to the next. For fiscal 2023, Honda plans a total annual dividend of ¥120 per share, including an interim and year-end dividend of ¥60 each. In a bid to improve its capital structure, the company decided to repurchase shares up to 100 billion yen during the period from August 12, 2022 to March 31, 2023.

Westport suffered a loss of 7 cents per share in the second quarter of 2022 compared to a profit of 7 cents a year ago. The loss was narrower than Zacks’ consensus estimate of an 8-cent loss. Westport posted consolidated revenue of $80 million in the quarter, beating Zacks’ consensus estimate of $75.9 million. Revenue increased 1% from the $79 million level a year ago. Westport generated negative adjusted EBITDA of $4.3 million in the second quarter compared to $6.2 million a year ago. This was mainly due to supply chain pressure and inflation on production costs.

Westport had cash and cash equivalents of $98.2 million at June 30, 2022, compared to $124.9 million at the end of 2021. Long-term debt decreased to $37.2 million at the end of the second quarter of 2022, compared to $45.1 million at December 31, 2021. Net cash used in operating activities was $16.5 million, a strong increase from $8.7 million dollars over the prior year period. WPRT currently carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ford reopened its bank of orders for the all-electric F-150 Lightning pickup nearly nine months after it stopped taking reservations. While this is indeed good news for customers keen on owning the F-150 Lightning, the improved prices might pinch their pockets. Ford has raised prices for the electric truck between $6,000 and $8,500 on various trim levels due to increased material costs and other factors, as the company cited.

The base model, the Lightning Pro, which initially cost $39,974, saw a price hike of $7,000 and is now $46,974. The XLT High Extended Range and Lariat Extended Range prices have increased the most by $8,500 and are now priced at $80,974 and $85,974, respectively. The Platinum Extended line saw the smallest price increase of $6,000, although it now sells for $96,874. Price increases will not affect customers who have already ordered a vehicle and are awaiting delivery. The sticker shock will be felt by reservation holders who have not yet ordered a truck.

Car Lotz entered into a definitive agreement with Technologies of change for a share-for-share merger. The combined company will continue to trade on the Nasdaq under the symbol SFT. Under the terms of the agreement, CarLotz shareholders are expected to receive nearly 0.692158 shares of Shift common stock for each share of CarLotz common stock. Based on the expected exchange ratio, upon closing of the merger, current Shift shareholders will own approximately 52.9% of the combined company, and current CarLotz shareholders will own approximately 47.1% of the combined company. , calculated on a fully diluted basis. At closing, the combined company is expected to have a cash position of approximately $125 million.

The combined company has the potential to be a leading omnichannel used vehicle retailer. The two companies have compatible geographies, where Shift is focused on the West Coast, while CarLotz has a strong presence in the Mid-Atlantic region. The agreement will thus merge the most profitable assets of the two companies and lead them to mutually reap the benefits. It aims to be the best online and in-person used car shopping platform by offering the widest assortment of used vehicle inventory to customers and enabling a flexible transaction.

Price performance

The following chart shows the price movement of some of the major automotive players over the past week and six-month period.

Image source: Zacks Investment Research

What’s new in the Auto Area?

Industry watchers will be keeping an eye on the July 2022 passenger vehicle registrations soon to be released by the European Automobile Manufacturers Association. Also stay tuned for any updates on how automakers will tackle the semiconductor shortage and make changes to their business operations.

Valerie J. Wallis