UBS Cuts Numbers on GM and Ford; BofA Notes Improvements for Tesla and VW

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By Senad Karaahmetovic

UBS analyst Patrick Hummel has reflected on the European and US Autos sector ahead of the Q2 earnings session.

The analyst believes the Q2 earnings should be similarly strong to Q1 for original equipment manufacturers (OEMs). Still, he moved to cut EPS for 2023E and 24E for all legacy OEMs by up to 30% “to reflect the much weaker macro picture that we expect to result in shrinking pricing power, a softer product mix, and lower finco results”.

He believes investors will be fully focused on the commentary centered around “potential first cracks”.

“For European OEMs, higher energy cost & risk of gas rationing imply additional downside to 2023 earnings. Across the legacy OEMs, we model c200-300bps EBIT margin contraction y/y in 2023E, and our estimates are now 15% below consensus. While stocks look cheap even after our EPS cuts at c5x PE 2023E vs. long-term 7-8x PE (the market prices a steeper drop in EPS), we think most investors are likely to remain on the sidelines waiting for consensus revisions to come through,” Hummel told clients in a note.

The analyst expects Tesla (NASDAQ:TSLA), Volkswagen (ETR:VOWG_p), and Stellantis (BIT:STLA) to “stand out positively”.

“Tesla with a very solid 26% auto GM ex-credits in a challenging quarter (Shanghai shutdown and Berlin and Austin ramp-up); VW with 7.9% OP margin (UBSe), despite €1.5bn expected commodity hedging losses; Stellantis with 13.2% OP margin in H1. On the other hand, Mercedes (ETR:MBGn) & BMW (ETR:BMWG) will likely have a sequential decline in EBIT margins q/q. Also, we expect first headwinds in finco results to materialize - this also applies to GM and Ford.”

As a result, Hummel cut price targets on several OEMs, including General Motors (NYSE:GM) to $56 from $77, Ford Motor (NYSE:F) to $13 from $20.50.

Elsewhere, BofA analyst Horst Schneider noted that the global BEV sales were up by 64% y-o-y and up c30% m-o-m in May 22, fueled by strong demand in China.

The analyst added that Tesla’s global market shares moved to 11% in May from 10% in April, while VW bounced back in Europe.

Volkswagen sold more units than Stellantis after a weak April performance.

“This was despite STLA again having strong sales of the Fiat 500 EV (6k unit sales) and the Peugeot e-208 (4.7k units). [For VW], global EV sales however still remain down c8% y-o-y. We think May should have been the trough. ID.3 sales look to be improving and the VW ID.4 continues to hold up. China BEV sales at 43k units y-t-d vs FY22 target of >160k units,” Schneider wrote in a note to clients.