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Investor concerns about Coronavirus clearly extend well beyond China. With that in mind, we thought it would be instructive to re-visit what earnings (and FCF) would look like if all key markets (i.e. China, North America, and Europe) experienced 10% drops. Our analysis is detailed within.
American Axle 4Q and 2020 Preview
American Axle reports their 4Q and 2020 outlook before the open on Friday. We expect the quarter to be in-line, but also note that our 2020 EBITDA estimate is slightly below consensus (we expect weakness on a few key platforms—in the U.S. and Internationally—to continue into this year). That said, if our estimates prove correct AXL should be poised for impressive FCF (we’re at $290 MM adj FCF; $260 MM after restructuring).
NIO Update: Meaningful improvement in fundamentals requires a lot more volume (and a lot more capital)
We were able to catch up with NIO management after the recent $100mln convertible bond issuance. The likelihood of longer-term financing is not clear to us, although we think state-owned funding sources are likely to be supportive.
Auto Predictions for 2020 and the Next Decade
With the turn of the decade, we took a different approach for our Auto Outlook Report, looking back at the last 10 years and looking ahead to the next 10… a period that for Autos, may be characterized by the most disruptive technological changes of the past 50+ years. Until now these changes were viewed as “down the road” developments that had limited relevance for stock picking. We sense that this is now changing.
So what about our view for 2020? And what will inspire confidence at YE2020, looking out to 2021?
Investors looking at this space need to consider the long term trends, as well as short term risks (e.g. Europe CO2 regs). Overall, we conclude that shares of GM and Ford are both set up well. Profitability/free cash flow for both is likely to inflect (we are upgrading Ford today). Amongst Suppliers we believe that Aptiv and Visteon are arguably best positioned to achieve long term growth.
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