JP Morgan, UBS Weigh In On General Motors
The reason for the appreciation in shares may be attributed to analyst notes Tuesday morning out of UBS and JP Morgan, both bullish on the stock.
JP Morgan is Overweight on the automaker, highlighting a few key developments.
GM concluded its enhanced product safety review that has led to a significantly elevated pace of vehicle recalls. That program went out with a bang, with another eight million vehicles being recalled for an additional cost of $500 million when lumped in with several earlier recalls.
Kenneth Feinberg set the parameters of a GM program to compensate individuals who were injured or family members of those who perished in accidents.
UBS' morning note said the bank will maintain its Buy rating and price target of $49.
UBS commented on the unknown compensation to be offered through Feinberg's plan, but pegs a broad range of "$20,000 to potentially several million dollars," while putting an estimate on the upper bound of ~$300 million, about one-third of Toyota Motors $1.1 billion civil settlement.
The bank noted a recall list of these models:
- 1997-2005 Malibu
- 1999-2005 Grand Am
- 2004-2008 Grand Prix
The result of the GM mess is going to be seen in earnings; UBS cut EPS for 2014 from $3.00 to $2.80 to account for $500 million increased recall costs related to the three models highlighted above.
GM June sales rose one percent, whereas Reuters reported the consensus estimate was a loss of over six percent.
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