Are U.S. Auto Sales Going to Plummet Following Confidence Data? Nah... (F) (GM) (TM)
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Price: $12.74 -1.62%
Overall Analyst Rating:
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Dividend Yield: 6.2%
EPS Growth %: -22.2%
Overall Analyst Rating:
NEUTRAL (
Down)Dividend Yield: 6.2%
EPS Growth %: -22.2%
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Sales for U.S. automakers aren't likely to drop off a cliff, amid consumer sentiment which says otherwise.
Early Tuesday, the Conference Board reported that U.S. confidence ripped nearly 10 points higher to 64.5 in December.
One data point in the release was that only 9.8 percent of respondents planned to buy an auto in the next six-months, which was the lowest reported since October 2010...over a year ago.
But is that a bad thing for automakers, or does the indicator give a false sense of reality?
Looking at several charts, it appears that sales dropped off slightly over the subsequent three-month period following the October 2010 numbers. The next several months actually had auto sales numbers holding at just below seasonally adjusted annual rates (SAARs) of 6 million for both passenger cars and light trucks, and maintaining that largely through the middle of 2011.
So, does that mean Ford (NYSE: F), Toyota (NYSE: TM), General Motors (NYSE: GM), and others are the hot stocks to buy, potentially being undervalued by the market? Depends on what you are looking at in your auto stock. All have been on the basic downtrend over the last year, with or without strong sales numbers.
Currently, Ford is 43 percent below its annual high, GM is down 49 percent, and Toyota is off just 32 percent over the last year.
Based on P/E multiples you might suspect that these stocks are fairly valued: Ford at 6.8 times, GM at 5.3 times, and Toyota at 8.9 times. But looking at a 2-year chart on each (save for GM) shows that P/E has been relatively flat.
Another factor to consider is gas prices. Automakers have better margins on trucks and SUVs, which sell less when fuel prices rise. Should an economic rebound take hold, and OPEC keeping output at the same levels of 2011, crude could shoot up on the expected demand increase.
As always, do your research. Ford and Toyota are indicated flat early Wednesday, while GM is showing some early signs of life.
Early Tuesday, the Conference Board reported that U.S. confidence ripped nearly 10 points higher to 64.5 in December.
One data point in the release was that only 9.8 percent of respondents planned to buy an auto in the next six-months, which was the lowest reported since October 2010...over a year ago.
But is that a bad thing for automakers, or does the indicator give a false sense of reality?
Looking at several charts, it appears that sales dropped off slightly over the subsequent three-month period following the October 2010 numbers. The next several months actually had auto sales numbers holding at just below seasonally adjusted annual rates (SAARs) of 6 million for both passenger cars and light trucks, and maintaining that largely through the middle of 2011.
So, does that mean Ford (NYSE: F), Toyota (NYSE: TM), General Motors (NYSE: GM), and others are the hot stocks to buy, potentially being undervalued by the market? Depends on what you are looking at in your auto stock. All have been on the basic downtrend over the last year, with or without strong sales numbers.
Currently, Ford is 43 percent below its annual high, GM is down 49 percent, and Toyota is off just 32 percent over the last year.
Based on P/E multiples you might suspect that these stocks are fairly valued: Ford at 6.8 times, GM at 5.3 times, and Toyota at 8.9 times. But looking at a 2-year chart on each (save for GM) shows that P/E has been relatively flat.
Another factor to consider is gas prices. Automakers have better margins on trucks and SUVs, which sell less when fuel prices rise. Should an economic rebound take hold, and OPEC keeping output at the same levels of 2011, crude could shoot up on the expected demand increase.
As always, do your research. Ford and Toyota are indicated flat early Wednesday, while GM is showing some early signs of life.
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