Analysts monitoring the auto industry’s profits and share values are becoming more pessimistic as the sales outlook worsens, according to a report by CBS Marketwatch.
December quarter profits estimates for the “big two,” Ford and General Motors, really started sliding in late November, gathering momentum on warnings from the two automakers in December.
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For now, CBS Marketwatch said, analysts are expecting Ford to post an average profit of $US0.64 a share in the fourth quarter, down from the consensus of $US0.88 a share in July, according to First Call.
The average estimate for General Motors for the quarter stands at $US1.13 share, down from $US2.57 a share in July.
CBS Marketwatch said that the signs weren’t good ‘for the gear heads’ even as the industry ended its strongest year ever for auto sales in the U.S. with 17.5 million units sold in 2000, according to Credit Suisse First Boston.
J.P. Morgan’s David Bradley on Tuesday (2/01/01) cut his estimates for auto stocks just ahead of the release of December auto sales figures.
According to CBS Marketwatch, the cuts marked Bradley’s third estimates trim in a month; his profits forecasts for the 15 stocks he covers are down 33 percent from early December. He’s also cut his estimate for DaimlerChrysler by 58 percent over the same period.
“Only a few months ago, we had forecast that the Big Three auto companies would see earnings per share growth in both 2000 and 2001; yet we now believe that they will see an average EPS decline of 18 percent in 2000 and an additional 30 percent in 2001,” Bradley reportedly said in a note to clients.
He reportedly said that the latest cut was prompted by a downward production revision for the first quarter by Ford. “A sign, in our view, that Ford does not expect the slowdown to be temporary.”
The biggest estimates cuts from Bradley on Tuesday were on Goodyear, seen down 25 percent and Dana Corp., seen down 9 percent.
He further cautioned clients from tip-toeing in the auto group stocks. Downside risk is still here, he told clients, according to CBS Marketwatch.
CSFB, meanwhile, reportedly told its clients to expect year-to-year sales declines for most of 2001, “with particularly weak comparisons in the first four months.”
