Wolfe Research highlights auto sector picks ahead of Q2 earnings

Investing.com -- Wolfe Research identified several automaker and supplier stocks with favorable setups heading into second-quarter earnings reports, following a volatile period that saw many stocks return to first-quarter levels.

The firm noted that concerns about raw material inflation and downward revisions to global light vehicle production forecasts have emerged, while investor enthusiasm for non-automotive growth opportunities has diminished.

Wolfe Research sees a positive setup for Ford Motor Company (NYSE: F), Lear Corporation (NYSE: LEA), and TE Connectivity (NYSE: TEL). The firm expects a more cautious setup for Aptiv PLC (NYSE: APTV) and Vontier Corporation (NYSE: VNT).

The research firm identified several stocks where material surprises are possible but noted heavy positioning concerns. General Motors Company (NYSE: GM) and BorgWarner Inc. (NYSE: BWA) are crowded on the long side, while Stellantis N.V. (NYSE: STLA), Autoliv Inc. (NYSE: ALV), and Magna International Inc. (NYSE: MGA) face crowding on the short side.

Looking beyond the quarter, Wolfe Research named GM as its preferred pick among Detroit Three automakers, citing the clearest path to earnings growth through 2027 and beyond, strong free cash flow, and capital returns.

Among suppliers, BWA remains the firm's top choice based on non-automotive tailwinds. Wolfe also favors TEL, pointing to attractive relative valuation and drivers supporting revenue and earnings growth starting in the second half of 2026, including AI revenue acceleration and cyclical tailwinds.

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