Goldman Sachs Says Autos Can Defend Margins (F) (LEA) (TEN) (DAN)

Goldman Sachs lowered price targets on a litany of auto stocks Friday, although they said remained positive on the sector saying companies can defend margins even in a slow growth environment.

The firm see a 15% EBITDA growth rate for the group, which is well above the 9% EBITDA contraction that is being implied in the shares. Even in a downside case, Goldman sees no growth in Europe and a modest 30 bp margin contraction in North America.

Margins are expected to be gains higher at Ford (NYSE: F) than at GM (NYSE; GM). "Our analysis suggests volume, pricing and moderating raw mats should drive F and GM margins up by 40 bp and 20 bp next year, with catch up costs on the product development side leading to smaller gains at GM than at F," the analyst said.

Goldman sees sees an average of 42% upside from current price levels. Their favorite picks in the sector are Tenneco (NYSE: TEN), Lear (NYSE: LEA), Dana (NYSE: DAN) and Ford - all Buy rated.

Price Target Cuts:
General Motors (NYSE: GM) (Buy) from $38 to $36
TRW (NYSE: TRW) (Neutral) from $63 to $58
Meritor (Nasdaq: MTOR) (Neutral) from $12 to $10.50
Tower International (NYSE: TOWR) (Neutral) from $19 to $17
Federal-Mogul (Nasdaq: FDML) (Neutral) from $23 to $21
Goodyear Tire & Rubber (NYSE: GT) (Sell) from $15 to $13.

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