Morgan Stanley Notes 2015 Concerns for General Motors, Lowers Estimates

In a report published Monday, Morgan Stanley analyst Adam Jonas adjusted estimates for

following recall charges and Venezuela FX. Jonas noted that he expects investors to focus on the recall as K2XX Sales in the first quarter. Including the $1.3 billion in recall-related charges in 1Q14, Morgan Stanley emphasized that 2015 estimates are more concerning. Jonas wrote, “Our 2015 EPS of $4.00 is ~16% below cons. on a cautious view on NA pricing, mfg costs and lower EM profit. At 8.5x PE (2015), GM trades at a modest discount to Ford and BMW, in line with Toyota and a premium to VW and Hyundai. We are confident GM management is aware of the key challenges facing the company and can address them over time. There's a lot of work to do, but with proper execution, GM still has the time and resources to remain a relevant force in global autos.” Morgan Stanley expects wholesale units to reach 837,000 in the first quarter. The analyst forecasts total revenues of $38 billion and $(0.03) EPS versus the $38.4 billion and $0.13 consensus estimates. In terms of adjusted EBITDA, Jonas expects GMNA of $46 million, the Europe segment to report a loss of $327 million, GMIO to have $57 million, and GMSA reporting a loss of $194 million. General Motors will report earnings before the opening bell on April 24. Shares of General Motors closed at $33.98 on Thursday.