4 Auto Stocks Likely to Outperform Q2 Earnings Estimates

The Auto-Tires-Trucks sector faces a challenging Q2 2025 earnings season, with expectations for a 27.7% year-over-year earnings decline and a 6% revenue drop, influenced by tariffs and rising R&D costs, despite modest U.S. vehicle sales growth. Amid this backdrop, and following beats from companies like Tesla and Ford, analysts highlight Cummins (CMI), Rivian (RIVN), Lucid (LCID), and American Axle (AXL) as strong candidates to surpass their second-quarter earnings estimates, driven by factors such as strategic electrification initiatives, cost efficiencies, and expanded market access.

Analysis

The Auto-Tires-Trucks sector is navigating a challenging second-quarter 2025 earnings season, with consensus estimates pointing to a significant 27.7% year-over-year earnings decline and a 6% revenue contraction. These headwinds are primarily attributed to tariff-related price pressures, which have seen an initial sales boost fade, and elevated R&D expenditures as the industry pivots to new technologies. Despite these sector-wide challenges, certain macro indicators remain resilient, including modest year-over-year growth in U.S. vehicle sales, a 22.9% rise in retail inventory to 2.16 million units, and an increase in average transaction prices to $46,233. Against this mixed backdrop, specific companies are identified as potential outperformers based on a positive Earnings ESP. Cummins (CMI) is positioned favorably due to its Meritor acquisition enhancing its powertrain offerings and strategic investments in electrification and green hydrogen. American Axle (AXL) stands out for its aggressive portfolio optimization, including divestitures in China and India, and a successful expansion into electric drive systems, supported by an exceptionally strong earnings surprise history. Among EV pure-plays, Rivian (RIVN) is focused on cost efficiencies and market expansion with its upcoming R2 model, having achieved positive gross profit for two consecutive quarters. Lucid (LCID) is leveraging strategic partnerships, notably a deal with Uber and access to Tesla's Supercharger network, to boost sales and market presence, with revenue estimates implying 24.1% year-over-year growth.

Key Decisions for Investors

• Given the forecasted 27.7% sector-wide earnings decline, investors should prioritize stock selection based on company-specific execution over broad sector exposure.
• Consider overweighting legacy suppliers successfully transitioning to electrification, such as American Axle (AXL) and Cummins (CMI), which exhibit strong earnings beat histories and clear strategic roadmaps.
• For portfolios with a higher risk appetite, Rivian (RIVN) and Lucid (LCID) offer event-driven opportunities based on positive earnings momentum signals, but their inconsistent profitability track records warrant careful monitoring of cost-control and partnership milestones.
• Ahead of imminent earnings reports, the combination of a positive Earnings ESP and a Hold-rated Zacks Rank suggests a higher probability of an earnings beat, making tactical long positions in AXL, CMI, RIVN, and LCID a consideration.