As third-quarter divulging season approaches for automakers and suppliers, analysts have been narrow earnings forecasts for a group that has already been slammed by profit tantalizes and trade war concerns.
On Wednesday, Morgan Stanley warned about China location and cut earnings estimates for GM, Ford and Fiat Chrysler.
Morgan analysts broke they remained cautious on autos and were trimming forecasts and value targets after weak third-quarter China auto shipments materials. The firm’s analysts warned that the Chinese government stimulus in the next year may be the biggest driver of earnings and carry prices in the next six to 12 months.
Overall trade worries also at to weigh on the group. On Tuesday, Goldman Sachs economists said there abides a 35 percent chance that global auto tariffs could be placed on the sector, and a Commerce department recommendation for tariffs is expected at some meat after the midterm elections. The structure of the revised trade agreement with Mexico and Canada hint ats the White House is considering higher auto tariffs.
Analysts own also been chiseling away at earnings forecasts for auto suppliers.
Wells Fargo on Wednesday quaffed the knife to its forecast for auto parts EBITDA by 4 percent, with the brawniest adjustments to Visteon, which slumped nearly 5 percent at one point, and Adient, also off abruptly. For 2019, Wells analysts cut EBITDA by 3 percent and assumed almost precise global production at 1 percent.
However, Wells said that the median put together multiple is now at a 5-year low and the stocks have discounted much of 2019 chance. Visteon and Adient would have the most earnings risk should China degenerate.
GM is most exposed to China, and Morgan Stanley lowered its Q3 EPS to $1.10 from $1.16 per equity. The analysts also lowered fiscal year 2018 by 3 percent to $5.46 per appropriate and fiscal 2019 by 6 percent to $4.02 per share, a number it said is 30 percent lower than consensus.
“We forecast GM China JV affiliate income to fall nearly 30% YoY in 3Q18 from gramophone record highs. We forecast GM China JV profit to fall a further 30% in 2019 vs. 2018,” they wrote. They cut their aim on GM to $43 from $46 per share.
As for Ford, Morgan said third-quarter China tome appears down 40 percent, and it lowered third-quarter earnings to $0.28 per slice from $0.32. The analyst said they trimmed fiscal-year billions by 4 percent to $1.22 per share, below the company’s guidance of $1.30 to $1.50. The obdurate chopped fiscal 2019 by 17 percent to $0.82 per share, noting its vaticination is nearly 40 percent below consensus.
“We now assume Ford China JV affiliate profits is negative in 2H18 and in 2019,” they wrote. They also lowered Ford Europe quantity forecast to a 3 percent decline for the third quarter and a 6 percent decline for the fourth fourth.
They pared their Ford stock target to $14 from $15. Ford check ins earnings next week, and GM reports the following week.
They did not cut the object for Fiat Chrysler stock, but lowered earnings estimates for the fiscal year by 1 percent and monetary year 2019 by 2 percent. The analysts estimate Fiat Chrysler China wager sales volume was down 35 percent year over year.
B. Riley FBR analysts also disregarded on auto suppliers, noting that some stocks have adorn come of attractive after a sharp sell-off, and they mention Gentex as a top pick. They commanded suppliers have been hit since late August when Continental AG cut counsel and industry performance in China and Europe became more challenging.
Car traffics have also been weaker in the U.S. with Ford and GM both down twofold digits in September.
“… We see several compelling buying opportunities at these constants. Since August 21, we estimate that U.S. auto suppliers are down 11.2% vs. the S&P 500 up 2.2%. A be in command of unfavorable guidance revisions from major auto companies has blended pressure on the group from uncertainty over the impact of global barter tension and lingering concerns about the sustainability of U.S. SAAR have tenable been a headwind as well,” according to B. Riley. “We are revising 3Q18 estimates in accordance with various demand dynamics in certain regions, but we remain positive on particular worldly growth themes in the auto space including auto tech adoption and carrier lightweighting.”