Market Overview

Sterne Agee Previews U.S. Light Vehicle Sales


Sterne Agee analyst Michael Ward noted Friday that “U.S. light vehicle sales for December are expected to be released throughout the day on Monday, January 5, 2015."

"The industry SAAR (seasonally adjusted annual rate) has averaged 16.8 million units since June" and Ward expected a similar pace in December.

Ward forecasted “an 11 percent gain in December (up 7 percent adjusted for one extra selling day) to 1.5 million units or 16.9 million units on a seasonally adjusted annual rate basis (SAAR).”

“For all of 2014, U.S. light vehicle sales are expected to reach 16.4 million units, the highest annual total since 2006,” according to the report.

In comparison, Bank of America analyst John Murphy recently estimated that light vehicle sales in December “will rise about 6 percent YoY on a selling day adjusted basis, for a seasonally adjusted annualized rate (SAAR) of 16.7mm.”

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Murphy believed “the strength in November (17.1mm SAAR) will continue, and expect[s] to close out 2014 with total unit sales of approximately 16.4mm, a healthy 5.7 percent increase from the 15.5mm units sold in 2013.”

Ward observed that “spending on new and used vehicles has been below the historical average every month since August 2005. In the period ending November, personal consumption spending on new and used vehicles as well as leasing totaled 3.2 percent of disposable income in the U.S. compared with an average of 4.1 percent since 1980. A return to more historical spending levels would add 3 million units to the annual sales total.”

The Sterne Agee report concluded that “most variables to assess the consumer’s ability and willingness to buy a vehicle have improved and suggest higher demand totals over the next 12 months.

"Our outlook for improving U.S. demand supports our positive view for the auto sector," it added.

The firm’s top picks were General Motors Company (NYSE: GM), Ford Motor Company (NYSE: F), BorgWarner Inc. (NYSE: BWA) and Penske Automotive Group, Inc. (NYSE: PAG).

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