Strong sales in the U.S., especially in trucks, and a return to strength for an American icon, are among the big auto industry takeaways highlighted by Bank of America in a look at auto sector OEMs after the earnings season.
Here’s a look at five takeaways from earnings season on the auto makers from Bank of America’s John Murphy.
1. Thanks, America!
North American sales propped up the industry and remained the main profit source for Detroit’s Big Three, although some of the strength was thanks to easier comparison with weak Chinese and European markets.
2. All About Them Trucks
The stronger North American sales weren’t seen in cars, but in trucks, crossovers and SUVs. Fiat Chrysler Automobiles NV (NYSE: FCAU), for example benefitted from a push in Jeep and Ram sales that allowed it to turn in strong sales numbers.
“The Detroit Three are just hitting the sweet spot of what we characterize as the ‘Truck Wars,’” Murphy wrote.
He noted FCA’s focus, having launched Jeep Wrangler and Ram LD last year and rolling out Jeep Gladiator and Ram HD this year; General Motors Company (NYSE: GM) is shifting more production to trucks and SUVS.
Ford Motor Company (NYSE: F), meanwhile, will reach its inflection point later this year with new crossovers Explorer and Escape and mid-size pickup Ranger, followed by the F-150 and Bronco in 2020, Murphy said.
3. The Heartbeat Of America
GM has been like a rock. Among the OEMs, GM appears to have the strongest outlook for 2019, Murphy said. He cited a realistic, tangible bridge between the first and second half of the year based on volume/mix inflection.
4. UAW Negotiations
The Collective Bargaining Agreement between the Detroit Three and the United Auto Workers expires in September and observers expect a challenging round of upcoming negotiations.
UAW interests in higher wages and job guarantees amid ongoing geographical shuffling won’t likely match up with management efforts to tackle growing costs, volatile global volumes, and particularly now, ongoing trade disruptions. “This could make reaching a final agreement (with one or all of the D3) more difficult than recent rounds,” Murphy wrote.
5. Building The Future
Murphy said a key driver of GM’s strong performance has been its “Core to Future transition.” Examples include GM’s exit of Europe and the development of its Cruise “Automated Mobility on Demand” – robo-taxis – fleet.
“It appears other OEMs are beginning to follow suit in repositioning their businesses, which could (over time) drive structurally higher earnings power,” Murphy said.
Truckin': Auto Sales Pivot Away From Cars In 2018
Latest Ratings for GM
|Jun 2019||Initiates Coverage On||Outperform|
|Feb 2019||Initiates Coverage On||Buy|
View More Analyst Ratings for GM
View the Latest Analyst Ratings
See more from Benzinga
- Citi: GM Truck Story Strong And Underappreciated
- Pence Boosts Hopes In Lordstown, Workhorse Stock With Comments On Idled GM Plant
- H. Ross Perot, Computer Industry Pioneer And Former Presidential Candidate, Dies At 89
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.