UBS on U.S. Auto Company Pensions: Funding Improves (F, GM, GT, MTOR, AXL, FMAL, JCI)

UBS on U.S. Auto Company Pensions: Funding Improves

Analyst, Colin Langan, said, "After declining through 2012, the benchmark pension discount rate has recovered recently, now down a modest 15 bps YTD. With the S&P 500 up ~13% and bond returns of ~3%, plan asset returns are +7% YTD, slightly below the companies’ return assumptions. Planned 2012 contributions should offset the above factors; therefore we forecast improved pension funding & slightly lower pension expense."

New rules on pension funding provide relief for large unfunded plan. Coling believes Ford (NYSE: F), Goodyear (NYSE: GT), Meritor (Nasdaq: MTOR), American Axle (NYSE: AXL) and Federal Mogul (Nasdaq: FMAL)

Overall, Langan expects pensions to be a headwind/tailwind for certain companies including: 1) GM (NYSE: GM) seeing about $0.05 headwind in EPS from 2013-15. Price Target lowered by $1 to $29; 2) Strong tailwinds in Johnson Controls (NYSE: JCI) and MTOR.

UBS maintains a 'Buy' rating on GM and Ford.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• CFRA Upgrades Progressive Corp. (PGR) to Buy, 'we view the shares as undervalued'
• Glencore Plc (GLEN:LN) (GLCNF) PT Raised to GBP5.15 at Barclays
• Wells Fargo Upgrades Churchill Downs (CHDN) to Overweight