HMC

Earnings Insight – General Motors

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Let’s cover some ground on General Motors’ (GM) third-quarter results. What management said: “GM delivered strong earnings and achieved several third quarter records that included net income, EBIT-adjusted, EBIT-adjusted margins, EPS diluted-adjusted and adjusted automotive free cash flow. Net income increased 104% to $2.8 billion as net revenue rose 10% to $42.8 billion, which is an all-time record. EBIT-adjusted was up 14% to $3.5 billion. EBIT-adjusted margin was 8.3%, up 0.3 percentage points and EPS diluted-adjusted was up nearly 15% to $1.72. Adjusted automotive free cash flow was $3.5 billion, up from $0.8 billion last year and ROIC adjusted of 30.6% on a trailing four-quarter basis was an all-time record continuing the positive impact of our disciplined capital allocation framework. … Read more

Major Automakers: Fundamental Uncertainty But Potential Investment Opportunity…Soon

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Source: YCharts The fates of major US automakers General Motors and Ford remain as tethered as ever, but we remain in awe at how punitive “this” frothy market is on their respective valuations. For one, GM is trading at 5 times forward adjusted earnings and boasts a near-5% dividend yield! By Kris Rosemann The market has been very kind to some, but perhaps overly punitive to others. While dividend-rich consumer staples giants continue to garner the favor of investors, “A Kleenex? Consumer Staples Trading At Nosebleed Levels (August 2016),” the ‘Detroit Three’ — Ford (F), General Motors (GM), and Chrysler (FCAU) — have all trailed the S&P 500 Index (SPY) return thus far in 2016 due to a variety of … Read more

Sharp Curves Ahead for US Auto Market?

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“Auto is clearly a little stretched, in my opinion…Someone is going to get hurt…We don’t do much of that.” — JP Morgan CEO Jamie Dimon, Yahoo Finance, June 2016  The month of May saw many major automakers report significant declines in sales in the US. Could the effect of pent-up demand for autos finally be slowing? An overheated loan market is adding concern to the situation. By Kris Rosemann Major automakers will be forced to make some important decisions in coming months. The US auto market is clearly slowing from the breakneck pace it set last year, particularly late last year, as total US auto sales fell 6% in May 2016 from May 2015. The strength of the rally in recent … Read more

US Auto Sales Continue Breakneck Pace in September

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The recent market volatility seemed to have had little impact on auto sales for the month of September. Amid a wild ride in the stock market that began near the conclusion of August, the US auto industry posted its best month in September since July 2005 in terms of seasonally adjusted annual rate (SAAR) of sales, which came in at 18.17 million. Consensus estimates were not nearly has high as the actual figure, as sales were initially expected to be closer to 17.6 million. A number of factors helped drive the strong sales numbers across the automotive industry. Consumer confidence remains high, as does disposable income; unemployment is at its lowest point since April 2008, and gas prices have fallen. … Read more

Things Are So Bad They’re Actually Good?

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Brazil’s (EWZ) economy, nearly 60% of South America’s (ILF) gross continental output, entered into technical recession following the second consecutive quarter of GDP declines, the latest reading a fall of nearly 2%. Economic data assessing the health of Brazil’s largest South American trade partner, Argentina (ARGT), remains “flawed”, according to the International Monetary Fund, which believes the country will only grow marginally in 2015 and remain stagnant in 2016. Including contributions from Venezuela, which is dealing with near-hyperinflation, the combined gross national product of the three struggling countries accounts for approximately three-fourths of South America’s entire economy. Though less than half the size of Brazil’s, Canada’s (EWC) economy has also fallen into recession during the first half of the year, … Read more

Major Automakers Lead July Sales Charge

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Key Takeaways –> The three months from May-July mark the best three month stretch in terms of vehicles sold in the US since August-October 2000. –> Truck and SUV demand remains high. Ford is gaining momentum as the F-Series nears full supply, and GM trucks continue strong sales growth. Honda set a July record for truck and SUV sales. –> The safety of connected vehicles and advanced auto technology has come into question recently. Fiat Chrysler has been hit by the largest safety fine in the industry’s history after failing to recall millions of vehicles. The US auto market continues on its pace for the best year in the past decade. A seasonally adjusted annual rate (SAAR) of 17.55 million … Read more

June Sales Keep Auto Industry on Track for Best Year in A Decade

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Key Takeaways The auto industry continues its strong comeback in 2015. Volume and profits are growing, and the industry is poised for a banner year. SUV and light truck demand are the primary drivers behind the sales growth, as the drop in gasoline prices slows purchases of smaller, more fuel-efficient cars. America’s best-selling line, the Ford F-Series, remains in limited supply, even as demand for the truck line remains high, but other producers, including GM, are looking to take advantage of the mismatch. Toyota remains the top-selling retail brand in the US, despite weak industry-wide car sales. June US auto sales, according to Autodata Corp, increased 3.9% over the year-ago period to a total of 1.48 million units, the most … Read more

May US Auto Sales Cruise Past Expectations

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Key Takeaways The US auto market has recovered significantly since the depths of the Great Recession, posting its best monthly unit sales levels in May in a decade and possibly positioning itself to reach the highest level of annual unit sales since 2001. Consumer demand continues to shift from cars to light trucks and SUVs as pain at the pump eases. America’s best-selling truck, the Ford F-Series, is losing market share, but this may just be temporary as it ramps up production to meet “sky-high” demand. Chevy and Toyota are busy capitalizing on the weakness, however. Tesla may have the brightest future among any auto maker in theory, but how long will it take for its plans to be realized?  … Read more

$45 Oil Prices!?!? There Is Never a Sense of Urgency When One Is Prepared

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Image Source: Macrotrends The bull market in energy (XLE) has lasted for the better part of a decade. Ever since the turn of the new century, energy perma-bulls have made the case that “black gold” (USO) should continue its ever-upward price advance thanks to ongoing demand from emerging and developing economies coupled with reduced inventories and areas of supply. We’re seeing this thesis challenged right at this moment. In deciding not to cut crude oil output in the face of oversupply and falling prices, the Organization of the Petroleum Exporting Countries (OPEC), for the lack of a better phrase, is now essentially engaged in a price war with producers in the US that are using breakthrough technology to produce oil … Read more

Ford Surprises to the Upside; GM Distracted By Recalls

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Sometimes it’s easy to fall in love with a company and its products. This, unfortunately, can become a behavioral and psychological barrier to financial outperformance. Whether you are a Ford or Chevy guy or gal determines little about how successful you will be as an investor in auto stocks. The most important determinant to financial outperformance in the auto space is not based on which type of car or truck you drive (or like), but instead, it is based on understanding and capitalizing on the factors that drive stock prices. To this point, stock prices are driven, of course, by the buying and selling of shares, and the buying and selling of shares is primarily influenced by a company’s intrinsic … Read more