Following Brexit, Baird Likes These Auto Stocks
Amid the Brexit-induced volatility, Baird is buy-rated on various auto stocks including the following names:
"The greatest fundamental risk is the impact on demand in the UK and Eurozone–confidence, employment and income are the drivers of auto sales," analyst David Leiker wrote in a note.
The analyst noted that the U.K. represents 19 percent of Western European registrations. About 90 percent of the vehicles sold in the U.K. are imported, mostly from the eurozone. Key brands are Ford Motor Company (NYSE: F) (13 percent), Vauxhall/General Motors Company (NYSE: GM) (11 percent), Volkswagen AG (ADR) (OTC: VLKAY) (OTC: VLKPY), BMW, AUDI AG NPV (OTC: AUDVF), Nissan Motor Co Ltd (ADR) (OTC: NSANY) and Mercedes.
Commenting on the impact on auto suppliers, Leiker said, "Based on exposure to the UK for an average supplier, we believe BREXIT represents a potential ~100–150bp headwind to revenue/profit during 2017."
On truck companies, the analyst sees a headwind of about 100bp. Leiker said the impact for WABCO and PACCAR is likely greater given higher exposure (at an estimated 6–7 percent of total sales), whereas Cummins Inc. (NYSE: CMI) would benefit from a weaker pound given costs outweigh revenues in the UK.
Latest Ratings for CMI
|Nov 2016||Evercore ISI Group||Upgrades||Hold||Buy|
|Oct 2016||Deutsche Bank||Maintains||Sell|
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