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Goldman Cuts Auto Sector to Neutral, Says 'Stocks Typically Lag When Rates Rise'

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Goldman Sachs' Patrick Archambault downgraded the Automobile sector to Neutral Tuesday morning, citing "rising rates and valuation."

The analyst added shares of General Motors (NYSE: GM) to the firm's "Conviction Buy" list while at the same time removing shares of Ford (NYSE: F). Archambault downgraded Delphi (NASDAQ: DLPH) and Tenneco (NYSE: TEN) from Buy to Neutral and downgraded shares of Standard Motor Products (NYSE: SMP) to Sell.

Archambault noted, "Auto equities have underperformed the S&P 500 by an average of 26% in 3 of the 4 last tightening cycles. This has occurred even in the face of rising demand as production comps have started to slow and is one of the reasons the sector has historically peaked 65% of the way through an expansion."

The Goldman analyst said the firm will "now focus on product driven names like GM and Ford which can bring some secular growth to the table." He said companies with "lagging end markets like Tires and commercial vehicles" while begin to get more attractive in this environment.

Shares of GM last traded down 0.5 percent to $36.30, shares of Ford are down 2.5 percent, Delphi shares are down 1.4 percent, Tenneco shares are down 1.9 percent, and shares of Standard Motor, with the concerning Sell rating, are down more than 6 percent.

Latest Ratings for GM

DateFirmActionFromTo
Jun 2017Morgan StanleyReinstatesOverweight
Jun 2017GuggenheimInitiates Coverage OnNeutral
Mar 2017NomuraUpgradesNeutralBuy

View More Analyst Ratings for GM
View the Latest Analyst Ratings

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