Market Overview

GM Could Have Difficulty Achieving Its Year-End Inventory Target

Share:
GM Could Have Difficulty Achieving Its Year-End Inventory Target
Related GM
Trump Threatens European Auto Tariffs, But May Have Himself To Blame For Record Trade Deficit
Would Ford Survive Another Recession? Elon Musk Thinks That's Unlikely
ClearBridge Dividend Strategy Portfolio Manager Commentary Q3 2018 (Seeking Alpha)

General Motors Company (NYSE: GM) reiterated at the end of August its year-end target of lowering its 88 days of U.S. inventory down to 70 days. However, after taking a deep dive into the automaker's prospects, Buckingham Research Group's Joseph Amaturo has some doubts the targets can be achieved — although the gap will be narrowed (see his track record here).

The analyst's calculations concluded that General Motors will end the year with approximately 84 days of inventory. This implies that an incremental 140,000 units of production will need to be cut for the company to achieve its 70-day target.

The financial implications to this in the bottom half of 2017 and 2018 will depend on the mix of vehicles that would be cut although most of the cuts will be cars, Amaturo stated. It is important to note that the 140,000 unit represents approximately 4 percent of IHS's forecast for General Motors' North American production rate in 2017.

From a different perspective and the analyst's "base case assumption," a 17.7 million sales pace for fiscal 2017 would be the minimum sales level required for General Motors year-ending inventory to drop to the guided 70 days.

Amaturo maintains a Neutral rating on General Motors' stock with an unchanged $33 price target, which implies downside from Wednesday's closing price of $37.67. The price target assumes a 5.2x multiple on 2017 EPS estimates and also implies an 11.5-percent automotive free cash flow yield on the analyst's estimate of $5.6 billion.

Related Links:

20% Of Millennials Don't Think A Car Will Be Necessary In 20 Years

August Auto Sales Recover Modestly As Industry Looks To Post-Hurricane Replacement Demand

____________

Image Credit: By MJCdetroit (Own work) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

Latest Ratings for GM

DateFirmActionFromTo
Nov 2018Morgan StanleyMaintainsOverweightOverweight
Nov 2018CitigroupMaintainsBuyBuy
Oct 2018CitigroupMaintainsBuyBuy

View More Analyst Ratings for GM
View the Latest Analyst Ratings

Posted-In: automakersAnalyst Color News Guidance Reiteration Travel Analyst Ratings General Best of Benzinga

 

Related Articles (GM)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ALRMImperial CapitalUpgrades58.0
ANDXSunTrust Robinson HumphreyDowngrades41.0
CMANomuraDowngrades86.0
CSLLongbow ResearchUpgrades122.0
HBANNomuraDowngrades15.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

5 Biggest Price Target Changes For Thursday

Pro: Biotech Is The Hottest ETF Of 2017 With Plenty Of Upside Ahead