UBS on U.S. Autos & Auto Parts: European Woes Largely Priced In; BorgWarner (BWA) Downgraded
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Up: 8 | Down: 6 | New: 26
Rating Summary:
28 Buy, 13 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 6 | New: 26
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UBS on U.S. Autos & Auto Parts: European Woes Largely Priced In by Colin Langan
Langan said, "We are forecasting a 4% y/y decline in 2012 European auto production. The moderate decline reflects that European sales are already 17% below their peak. In addition, the UK, Italy, and Spain (~33% of Europe) are already down over 25% from their peaks, and Germany (~17% of Europe) will likely be stable. Despite the rising European risk, we still believe that the US has significant pent up demand. Note, 2009 US sales fell 39% from their peak (vs. only 19% in Europe)."
"Ford & GM more than pricing in worst case for Europe: GM (NYSE: GM) is trading 2.3x our revised 2012 EBITDA estimate while Ford (NYSE: F) is trading at 2.7x our revised estimate. In addition, we estimated that in a severe recession losses in Europe would be ~$2.1bn for GM and $1.4bn for Ford. Even under this scenario, GM is trading at 2.5x, and Ford is trading at 2.9x."
"Suppliers have higher European risk...We are lowering our 2012 EPS estimate and price targets for suppliers Visteon (NYSE: VC), Lear (NYSE: LEA), BorgWarner (NYSE: BWA), and Johnson Controls (NYSE: JCI) as well as automakers Ford and GM. The average EPS revision is 6% (range of 0% to 14%). We are also lowering our rating on BWA to a Neutral from a Buy."
Langan said, "We are forecasting a 4% y/y decline in 2012 European auto production. The moderate decline reflects that European sales are already 17% below their peak. In addition, the UK, Italy, and Spain (~33% of Europe) are already down over 25% from their peaks, and Germany (~17% of Europe) will likely be stable. Despite the rising European risk, we still believe that the US has significant pent up demand. Note, 2009 US sales fell 39% from their peak (vs. only 19% in Europe)."
"Ford & GM more than pricing in worst case for Europe: GM (NYSE: GM) is trading 2.3x our revised 2012 EBITDA estimate while Ford (NYSE: F) is trading at 2.7x our revised estimate. In addition, we estimated that in a severe recession losses in Europe would be ~$2.1bn for GM and $1.4bn for Ford. Even under this scenario, GM is trading at 2.5x, and Ford is trading at 2.9x."
"Suppliers have higher European risk...We are lowering our 2012 EPS estimate and price targets for suppliers Visteon (NYSE: VC), Lear (NYSE: LEA), BorgWarner (NYSE: BWA), and Johnson Controls (NYSE: JCI) as well as automakers Ford and GM. The average EPS revision is 6% (range of 0% to 14%). We are also lowering our rating on BWA to a Neutral from a Buy."
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