Key Insights into the Auto-Tires-Trucks Sector
As the second quarter earnings season unfolds, the Auto-Tires-Trucks sector is under significant scrutiny. Investors are keeping a watchful eye on stock performances due to growing concerns about import tariffs set by the previous administration. Major industry players such as Tesla, Ford, General Motors, Aptiv, and O’Reilly Automotive have recently announced quarterly earnings, many of which exceeded expectations.
Earnings Expectations in the Auto Sector
According to recent reports, projections indicate a dramatic decline of 27.7% in the auto sector’s earnings for the second quarter of 2025 compared to the prior year, with a revenue drop of 6%. Despite several companies still pending their earnings announcements, the Zacks Stock Screener has highlighted a few stocks likely to outperform earnings estimates, including Cummins Inc., Rivian Automotive, Lucid Group, and American Axle & Manufacturing.
Current Vehicle Sales Trends
During the second quarter, the U.S. saw slight year-over-year growth in vehicle sales, primarily driven by strong demand for gasoline and hybrid vehicles. Recent data from Cox Automotive indicates that the seasonally adjusted annual rate of new vehicle sales reached 15.3 million units in June.
Inventory levels have risen, with retail vehicle stocks climbing to 2.16 million units—a 22.9% increase from June 2024. However, average transaction prices also saw an uptick to $46,233, reflecting a $1,400 increase compared to last year. Initially, the higher tariffs fueled demand among cost-sensitive buyers, but sales momentum has since waned due to the rising costs that have become commonplace. Additionally, elevated expenses in research and development aimed at cutting-edge tech may also negatively impact profits.
Identifying Strong Performers
While certainty around which companies will exceed earnings estimates remains elusive, an innovative approach known as Earnings ESP simplifies this task. It helps investors pinpoint promising stocks before their earnings reports. A positive Earnings ESP coupled with a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold) significantly increases the likelihood of earning surprises, with research suggesting probability rates as high as 70%.
Highlights of Select Companies
Cummins Inc.
Cummins stands as the dominant engine manufacturer globally, bolstered by a robust product lineup and extensive market reach. The recent acquisition of Meritor has positioned Cummins as a leading provider in both internal combustion and electric vehicle powertrain solutions. The company is actively enhancing its expertise in electrification and clean energy, working with technologies such as fuel cells and green hydrogen. Cummins anticipates continued growth momentum in its electrolyzer offerings. With an Earnings ESP of +2.79% and a Zacks Rank of 3, Cummins is scheduled to report its second-quarter results on August 8, with expected earnings of $4.99 per share on revenues of $8.47 billion.
Rivian Automotive
Rivian is working to expand its market share with the introduction of its R2 and R3 models, aimed at consumers with tighter budgets. The R2, set to launch in early 2026, will start at around $45,000, showcasing a significant reduction from its premium R1 line. Rivian is currently enjoying cost efficiencies and engineering optimizations that are set to lower expenses. The company boasts an Earnings ESP of +8.53%, with a scheduled report date of August 5, and anticipated revenue of $1.26 billion.
Lucid Group
New partnerships are enhancing Lucid’s prospects. The company’s vehicles are now compatible with the Tesla Supercharger network, providing access to over 23,500 charging stations, which could boost sales for the Lucid Air. Moreover, Lucid has entered a deal with Uber to supply 20,000 vehicles featuring autonomous technology, bolstered by a $300 million investment from Uber. Lucid has an Earnings ESP of +3.08%, with revenue expectations of approximately $253.4 million, indicating year-over-year growth.
American Axle
Advancing in the electric drive sector, American Axle is benefitting from its collaboration with Inovance, which is enhancing its electrification revenue. The company’s acquisition strategy is also designed to optimize its portfolio, with significant transactions increasing its market presence. American Axle’s Earnings ESP stands at an impressive +17.59%, with expected earnings of 13 cents per share on revenues of $1.51 billion for its upcoming report on August 8.
Conclusion
This current earnings season presents unique opportunities and challenges within the Auto-Tires-Trucks sector. With several companies poised for better-than-expected results, investors should keep a close watch on upcoming earnings announcements and market reactions.
