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Barclays On Auto Suppliers: Mobileye The Top Pick, Delphi, Harman, Tenneco 'Fine Bets'

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Barclays On Auto Suppliers: Mobileye The Top Pick, Delphi, Harman, Tenneco 'Fine Bets'
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The macro environment for Auto Suppliers appears to be weakening, with headwinds in both the United States and Europe, Barclays’ Brian A. Johnson said in a report. He maintains a Neutral stance on the space, however, saying that the stocks already seem to be reflecting the risks in their valuations.

U.S. Expectations

“We were previously hopeful that U.S. auto sales could stay on a plateau in the 17 million range over the next 1–2 years. However, we are modifying our outlook for U.S. light vehicle sales to an ‘eroding plateau,’” analyst Brian Johnson wrote.

The U.S. sales volume estimates for 2016, 2017 and 2018 have been reduced from 17.6 million to 17.3 million, from 17.5 million to 16.7 million and from 17.2 million to 16.1 million, respectively.

Related Link: Barclays Sees Ford, GM Outperforming Auto Suppliers

Europe Estimates

The sales growth estimate for 2017 has been lowered from 2.4 percent to a decline of 0.6 percent, citing challenges related to political risks and uncertainty in the U.K. and Europe.

Johnson added that the 2016 and 2017 organic growth outlook for Auto Suppliers was “modest at best,” with margins near peak levels, implying limited possibilities of positive earnings revisions, and “more likely negative earnings revisions.”

Investment Ideas

The analyst maintains an Overweight rating on Mobileye NV (NYSE: MBLY), while raising the price target from $50 to $60.00. He named the stock as the Top Pick in the sector. The EPS estimate for FY1 remains unchanged at $0.69, while that for FY2 has been reduced from $1.02 to $0.96.

Barclays maintains an Overweight rating on Delphi Automotive PLC (NYSE: DLPH), while raising the price target from $88 to $85. Johnson commented that this stock was “the best house in a bad neighbourhood.” The EPS estimates for FY1 and FY2 have been reduced from $6.08 to $6.00 and from $6.98 to $6.69, respectively.

Related Link: Mobileye Remains Barclays' Top Pick Ahead Of Q2 Earnings

An Overweight rating is maintained on Harman International Industries Inc./DE/ (NYSE: HAR), with the price target being reduced from $105 to $103. The EPS estimate for FY1 has been raised from $6.20 to $6.21, while that for FY2 has been lowered from $7.00 to $6.85.

Johnson maintains an Overweight rating on Tenneco Inc (NYSE: TEN), while lowering the price target from $60 to $58. The EPS estimate for FY1 has been raised from $5.65 to $5.68, while that for FY2 has been lowered from $6.28 to $6.21.

The analyst said that both Harman International and Tenneco exhibited “dependable EPS growth.” He added that these two stocks, along with Delphi were "fine bets."

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Latest Ratings for MBLY

DateFirmActionFromTo
Dec 2016NeedhamInitiates Coverage OnBuy
Sep 2016SunTrust Robinson HumphreyInitiates Coverage onBuy
Jul 2016DoughertyUpgradesNeutralBuy

View More Analyst Ratings for MBLY
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