Citi Lowers Estimates on Several Auto Suppliers; Sees Pair Trade with Johnson Controls (JCI) and BorgWarner (BWA)

September 19, 2008 8:57 AM EDT

Citi analyst says, "We lower estimates for Johnson Controls (NYSE: JCI) and Tenneco (NYSE: TEN), and targets and estimates for BorgWarner (NYSE: BWA), Goodyear (NYSE: GT), Lear (NYSE: LEA), and Magna (NYSE: MGA). Our revisions reflect lower European volume and foreign currency translation assumptions. With our revisions, we view consensus estimates to be too high as European softness does not seem baked into numbers yet."

Pair Trade: Underweight JCI, Overweight BWA - JCI is well-positioned in this environment, but the stock has outperformed both BWA and industrial conglomerate stocks by a meaningful margin, leaving it vulnerable to broader economic headwinds or worsening U.S. auto credit conditions.

Johnson Controls, Inc (Johnson Controls) provides automotive interiors, products and services that optimize energy usage in buildings and batteries for automobiles and hybrid electric vehicles, along with related systems engineering, marketing and service expertise.

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