Argus Downgrades GM, Warns 2016 Will Be Auto Market Peak

Argus' Bill Selesky downgraded the rating on

from Buy to Hold. "Despite GM's recent strong performance, we are concerned that 2016 will be the peak of the current cycle for U.S. auto sales," Selesky mentioned. The analyst expects U.S. light vehicle sales in 2016 to rise only 1.1 percent, from the 6 percent growth seen in 2015 and 7.7 in 2014. "We also expect slower growth in international sales, with declines in some emerging markets, and look for adjusted earnings growth to decline to 9.6 percent in 2016 from 64.6 percent in 2015," Selesky noted. This slower growth is expected to pressure the stock in the near term. The shares have been underperforming the S&P 500 Consumer Discretionary Index since the beginning of 2016. On February 3, General Motors reported its adjusted EPS for 4Q15 ahead of the estimate and the consensus, as well as the year ago levels, driven by higher sales in China and North America. Net revenue came in flat with the year ago level. The diluted EPS estimate for 2016 has been raised from $5.42 to $5.50, to reflect the company's guidance.