Ford Motor Co. (NYSE: F) and General Motors Co. ( GM) investors hoping that August would bring some relief for a stalling U.S. auto industry may be disappointed. According to a new report from Buckingham Research Group, U.S. light vehicle retail sales declined 4.4 percent year-over-year through the first 17 selling days of August.
Buckingham analyst Glenn Chin says investors should expect full-month total sales down 2.9 percent, marking the eighth consecutive month of declines in the U.S. market. Buckingham’s projections suggest August’s seasonally adjusted annual rate (SAAR) for auto sales will come in at just 16.6 million units.
A softening U.S. auto market is certainly no secret for investors, but Chin says a second consecutive month of seasonally adjusted sales under 17 million could trigger further weakness for auto stocks.
[See: 10 Ways to Invest in Driverless Cars.]
“We maintain our view of a maturing auto cycle and the risk it poses in terms of pricing and/or production, leading to our cautious stance on [original equipment manufacturer] stocks,” Chin writes.
Despite the weak overall start to the month, GM sales were actually up 1.9 percent in the first 17 days of August, and LMC Automotive is projecting 3.1 percent sales growth for the full month. Unfortunately for GM investors, Chin says sales strength was likely driven by aggressive promotional deals, which might weigh on margins and profits.
Ford got off to a bumpier start to the month, with sales declining 5.7 percent. LMC is projecting a full-month August sales decline of 6.1 percent for Ford.
Until sales numbers show signs of life, Chin says investors should forget about manufacturers. But it’s not all doom and gloom in the U.S. auto market.
“Select auto retailers, on the other hand, can likely continue to grow revenue and earnings, even in a flat, slightly down SAAR environment,” he writes.
[See: 5 Automakers to Rev Up a Long-Term Investor’s Portfolio.]
Buckingham recommends Lithia Motors ( LAD) and Penske Automotive Group ( PAG) as top auto stock picks. The firm has “neutral” ratings on Ford and GM stock, but has “buy” ratings on both Lithia Motors and Penske.
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Ford, GM Investors Bracing for a Disappointing August originally appeared on usnews.com
