We undertook the unenviable task of reading the proxy for every company under coverage (and one we don’t cover: TSLA).
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Using Return on Invested Capital as a lens, we take a look at which companies and sub-industries capture the highest returns within the automotive value chain. We calculate ROIC across 27 companies within industries including dealers, OEMs, parts suppliers, aftermarket retailers, and service providers.
On April 26th GM reported revenue of $36.1B beating cons. of $34.3B and our $33.0B. N.A EBIT margins were 120 bps below cons. of 9.2%, in part due to retooling downtime, but mgmt. still expects 10% full year margins. GMI met consensus, while GMF had a strong Q and delivered EBIT 60% above cons. Q1 EPS-adj. of $1.44 beat Cons. of $1.24 and our $1.02. GM shares were flat vs. a 1% gain for the S&P 500.
April 25th, after market close, Ford reported Q1 2018 results. Ford’s EPS-adj. of $0.43 was above Cons. of $0.41, but below our $0.45. Ford also provided updated messaging on its long term fitness and strategic plans. FY 2018 guidance of $1.45-$1.70 was unchanged, and the company now expects 2018 to be a trough in profitability. On the day of the report shares were up 3% vs S&P 500 of 1%.
This morning (02/06/18), GM reported Total Revenue of $37,697 beating Consensus of $36,977 and just missing our $37,953. North American EBIT margins were 130 bps higher than consensus of 8.7%. GMSA turned in a second consecutive profitable quarter, albeit EBIT-adj. came in $20M below consensus of $97M. GMIO and GM Financial both posted strong EBIT beats ($339M and $301M vs. Cons. $318M and $228M, respectively). Q4 EPS-adj. of $1.65 was well above consensus of $1.39 and our $1.33. GM Shares climbed 6% higher on the news.
Most of you cover 50 – 200 stocks and therefore don’t have the liberty of being as into the weeds on every name – that’s our job. To help you do yours, we have created a comprehensive, but chart-heavy, guide to our coverage that is meant to have shelf life and that can be referred back to when you are ready to dig more into our coverage.
Yesterday (1/24/2018) PM Ford reported Q4 2017 results (having pre-reported in Detroit). Ford’s 2017 full-year EPS-adj. of $1.78 and Q4 result of $0.39 was below consensus’ and our estimates of $0.46 and $0.48, respectively. Ford also provided FY 2018 guidance of $1.45-$1.70 vs. consensus of $1.59 and our $1.74 with a 15% tax rate in 18 but 18% in 2019. Shares were down -4% today as sentiment remains bad.
The tax overhaul is adding a lot of complexity to fundamentals as investors and companies we speak with struggle to digest consensus expectations and current valuation metrics. We sifted through both Factset and Bloomberg estimates to calculate a bottoms-up consensus of ONLY analysts that have revised estimates on tax reform.
In our first tax reform note we studied numerous angles on tax reform. As a continuation, we are studying additional angles and also adjusting numbers and price targets (Exhibit 1). While we remain concerned of the long-term risk/reward of tax reform, near-term we expect consensus EPS revisions to occur as the rewards are easier to forecast than the risks.
After years of inflating asset prices via credit let’s unwind QE, raise interest rates, meddle in regional wars, reduce homeownership incentives, rush a radical tax overhaul including reducing corporate taxes, rebalance personal taxes, and expanding the fiscal deficit, all during a period of trough unemployment. Let’s just throw all of the economic models out, nothing can go wrong here, I’m psyched let’s go shoot some birds
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