Goldman Is Neutral On Detroit Automakers, Favors Ford Over GM
“The US Auto cycle peaked in 2015 and is currently being held at a plateaued level by increasing OEM incentives,” Goldman Sachs’ David Tamberrino said in a report.
Dividend yields are a cushion for both Ford and General Motors, and are not at risk over the next 12 months. Tamberrino added, however, that relative expectations are currently lower for Ford, whereas product cycles at General Motors would likely boost costs over the next couple of years.
The price target for the automaker has been reduced from $13 to $12. Ford has issued “appropriately conservative” guidance through 2018, the analyst stated.
US SAAR would likely normalize over the coming years, and both North America and total company profit before tax could be under pressure in the medium term.
“While the company has made it very clear that it can sustain its dividend through a cycle, we believe investors are unwilling to underwrite that potential stability until it is proven,” Tamberrino wrote.
The price target for the automaker has been reduced from $37 to $29. General Motors could witness pricing pressure due to intensifying competition amid a soft market. Moreover, incremental regulatory costs could weigh on GMNA profit.
“This is primarily manifested in the company’s next pickup truck refresh for MY2019 (i.e., in 2018) that we expect to include increased use of aluminum content – carrying a higher cost, as well as the launch of the Chevy Bolt which management expects to be loss making at the EBIT level,” the analyst commented.
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