This is a huge week for auto stocks Ford Motor Company (NYSE: F) and General Motors Company ( GM). GM is expected to report its third-quarter earnings on Tuesday before the market opens, and Ford is expected to follow with its earnings release on Thursday morning before the open.
GM dominated the third quarter. The stock gained nearly 25 percent on increasing investor optimism related to the company’s autonomous vehicle technology. Ford stock gained roughly 2.4 percent since its last earnings report. Investors are concerned Ford has fallen behind its peers in adapting to the next wave of auto technology.
[See: Stock Market Showdown: Ford Versus GM.]
UBS analyst Colin Langan says there are a handful of important metrics that could move GM stock, including North American margins and pricing, and any potential changes to full-year earnings per share guidance of $6 to $6.50.
In addition, GM investors should pay close attention to any updates from GM’s Cruise Automation subsidiary, which is developing GM’s autonomous car technology. UBS is expecting GM to report third-quarter earnings per share of $1.10, slightly below consensus estimates of $1.12. “While the stock has run following positive press around Cruise Automation, its autonomous car unit, the valuation still implies limited long term value on the core auto business,” Langan says.
For Ford stock, Langan says North American margins and pricing will also be key, as well as full-year EPS guidance of $1.65 to $1.85. He says the auto market may have reached its cyclical peak, but UBS anticipates sales will plateau rather than decline.
UBS is calling for Ford to report third quarter EPS of 37 cents, topping consensus forecasts of 32 cents.
[See: Car Companies and the Race to Profits.]
Ford stock is currently priced at a price-earnings ratio of 6.5, a significant valuation discount to its historical ratio of around 9.
“The market is not crediting Ford with upside from its investments in big data, (electric vehicles) and autonomous technology,” Langan says.
UBS is bullish on both Ford and GM in the long-term and has “buy” ratings on both stocks. The firm has a $15 price target for Ford and a $50 price target for GM.
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Ford Motor Co., General Motors Company Gear Up for Earnings Week (F, GM) originally appeared on usnews.com
