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How Healthy Are Auto Stocks?

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How Healthy Are Auto Stocks?

Deutsche Bank analyst Rod Lache said that the firm had a "generally positive" view of auto stocks following Deutsche Bank's Industrials Conference.

Despite having Hold ratings across the industry, the firm outlined positive takeaways for BorgWarner Inc. (NYSE: BWA), Dana Holding Corporation (NYSE: DAN) and Ford Motor Company (NYSE: F). The firm was more cautious on American Axle & Manufact. Holdings, Inc. (NYSE: AXL) and Tenneco Inc (NYSE: TEN).

Globally, North American production is expected to be "very strong" with a "favorable" mix, according to the note. Deutsche Bank also said it expects the accelerated European production to be at least partially offset by a decline in China.

Related Link: 2 Experts Weigh In On May's Auto Sales

On the specific names, Lache said that while BorgWarner's 2015 growth could "prove somewhat lower than expected," 2016 earnings growth could be "surprisingly strong." At Dana Holding, the long-term takeaways were "generally positive" despite near-term pressure from South American operations. At Ford, the presentation focused on Ford Motor Credit Company's potential.

The analysts also said that "investor sentiment for American Axle and Tenneco could remain challenged." At American Axle, the biggest overhang is the negotiation for General Motors Company (NYSE: GM)'s next full-size truck program. Similarly, Tenneco may see pressure based on revenue headwinds.

More broadly, the note expressed concern on the overall auto business model.

"Automakers are facing unprecedented changes in areas including fuel efficiency, active safety, autonomous driving, and connectivity," it said. These factors will combine to result in increased outsourcing and expansion into additional areas.

Despite the neutral view on the industry, three of the five companies - BorgWarner, American Axle and Tenneco have outperformed the S&P 500 year-to-date. The stocks have gained 10.5 percent, 8.4 percent, and 6.9 percent, respectively. Dana Holding and Ford Motor have both underperformed the broad index.

Latest Ratings for BWA

DateFirmActionFromTo
Mar 2021Wells FargoInitiates Coverage OnOverweight
Mar 2021RBC CapitalMaintainsSector Perform
Mar 2021KeyBancMaintainsOverweight

View More Analyst Ratings for BWA
View the Latest Analyst Ratings

 

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