UBS on US Autos & Auto Parts: Pensions Hit by Decade Low Rates
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Rating Summary:
12 Buy, 21 Hold, 4 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 9
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UBS on US Autos & Auto Parts: Pensions Hit by Decade Low Rates
Analyst, Colin Langan, said, "The discount rates & asset returns drive unfunded pensions higher The benchmark discount rate for pensions has declined ~110bps since year end. Moreover, the S&P 500 is down ~13% YTD, well below expected returns on pension plan assets of ~8%. These declines will increase pension obligations and 2012 pension expense. We estimate that Ford’s (NYSE: F) PBO will increase $14bn y/y and GM’s will increase $20bn y/y."
"One more cut to price targets and earnings - We partially adjusted our EPS and price targets for pensions in our Sept 20th report Leading Indicators Point to Slowing Growth; however, discount rates have declined further since our report. We are also using more conservative asset return assumptions. To reflect higher unfunded pensions, we are lowering our price targets and EPS estimates for the automakers and suppliers."
Other stocks in the sector include: GM (NYSE: GM), Toyota (NYSE: TM), Honda (NYSE: HMC), Johnson Controls (NYSE: JCI) and American Axle (NYSE: AXL), Dana (NYSE: DAN), Lear (NYSE: LEA), Tenneco (NYSE: TEN), along with Meritor (NYSE: MTOR)
Analyst, Colin Langan, said, "The discount rates & asset returns drive unfunded pensions higher The benchmark discount rate for pensions has declined ~110bps since year end. Moreover, the S&P 500 is down ~13% YTD, well below expected returns on pension plan assets of ~8%. These declines will increase pension obligations and 2012 pension expense. We estimate that Ford’s (NYSE: F) PBO will increase $14bn y/y and GM’s will increase $20bn y/y."
"One more cut to price targets and earnings - We partially adjusted our EPS and price targets for pensions in our Sept 20th report Leading Indicators Point to Slowing Growth; however, discount rates have declined further since our report. We are also using more conservative asset return assumptions. To reflect higher unfunded pensions, we are lowering our price targets and EPS estimates for the automakers and suppliers."
Other stocks in the sector include: GM (NYSE: GM), Toyota (NYSE: TM), Honda (NYSE: HMC), Johnson Controls (NYSE: JCI) and American Axle (NYSE: AXL), Dana (NYSE: DAN), Lear (NYSE: LEA), Tenneco (NYSE: TEN), along with Meritor (NYSE: MTOR)
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