Following Brexit, Baird Likes These Auto Stocks

"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.

Related Link: Canaccord: Brexit Vote Not A Major Headwind For Aerospace

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 F (13 percent), Vauxhall/General Motors Company GM (11 percent), Volkswagen AG (ADR) VLKAY VLKPY, BMW, AUDI AG NPV AUDVF, Nissan Motor Co Ltd (ADR) 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. CMI would benefit from a weaker pound given costs outweigh revenues in the UK.