Jefferies on Autos & Auto Parts - May Auto Sales Review: Addition by Subtraction
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Price: $13.04 +0.69%
Rating Summary:
12 Buy, 21 Hold, 4 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
Rating Summary:
12 Buy, 21 Hold, 4 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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Jefferies on Autos & Auto Parts - May Auto Sales Review: Addition by Subtraction
Jefferies analyst said, "Ford (NYSE: F) and GM (NYSE: GM) sold off 4.6% and 5.0%, respectively, (vs. the S&P 500 down 2.3%) yesterday following generally underwhelming monthly auto sales reports. Why the dramatic sell-off on one month of sales? Consider that the lead story in Automotive News just 30 days ago on J3 constraints was, "Stars Are Aligning for Detroit 3 Surge," with the lead sentence: "No more excuses." While the optimist would highlight that Ford and GM gained 120bps of share YoY on average during May, the pessimist would likely point out that this was really just "addition by subtraction" — i.e., flattish D3 sales volumes into a 24.3% YoY decline on average from Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan (Nasdaq: NSANY). Hyundai's sales soared 30.8% YoY, making it the decided beneficiary of J3 constraints. D3 incentives declined month-over-month, as expected, albeit no more than the industry average, while mix generally failed to improve (after factoring in lower J3 car sales) despite lower gasoline prices. To be blunt, it was tough finding many silver linings among the increasing cloud cover."
"The biggest differentiation between Ford and GM out of the May sales results seems to be on the inventory front — with Ford carrying days' supply in the low 50's vs. GM around 63 days. The divergence is even wider in pick-up trucks, with F-Series inventories hovering around 60 days vs. GM still tracking north of 110 days. Even still, with a potentially deteriorating end market, our sense is that fears are rising about whether GM's problem will become Ford's: If pick-up truck sales don't rebound in 2H (as GM called for on the call), intuitively the risk steadily increases that GM will have to raise incentives on these vehicles in order to clear inventories. This would likely represent a pricing headwind not only for GM, but also for Ford (from a competitive standpoint)."
Jefferies analyst said, "Ford (NYSE: F) and GM (NYSE: GM) sold off 4.6% and 5.0%, respectively, (vs. the S&P 500 down 2.3%) yesterday following generally underwhelming monthly auto sales reports. Why the dramatic sell-off on one month of sales? Consider that the lead story in Automotive News just 30 days ago on J3 constraints was, "Stars Are Aligning for Detroit 3 Surge," with the lead sentence: "No more excuses." While the optimist would highlight that Ford and GM gained 120bps of share YoY on average during May, the pessimist would likely point out that this was really just "addition by subtraction" — i.e., flattish D3 sales volumes into a 24.3% YoY decline on average from Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan (Nasdaq: NSANY). Hyundai's sales soared 30.8% YoY, making it the decided beneficiary of J3 constraints. D3 incentives declined month-over-month, as expected, albeit no more than the industry average, while mix generally failed to improve (after factoring in lower J3 car sales) despite lower gasoline prices. To be blunt, it was tough finding many silver linings among the increasing cloud cover."
"The biggest differentiation between Ford and GM out of the May sales results seems to be on the inventory front — with Ford carrying days' supply in the low 50's vs. GM around 63 days. The divergence is even wider in pick-up trucks, with F-Series inventories hovering around 60 days vs. GM still tracking north of 110 days. Even still, with a potentially deteriorating end market, our sense is that fears are rising about whether GM's problem will become Ford's: If pick-up truck sales don't rebound in 2H (as GM called for on the call), intuitively the risk steadily increases that GM will have to raise incentives on these vehicles in order to clear inventories. This would likely represent a pricing headwind not only for GM, but also for Ford (from a competitive standpoint)."
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