Search Coverage List, Models & Reports
Search Results1-10 out of 35
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.
NIO reported 3Q19 (quarter-end Sept 30) results before market open on Monday. The company did what they said they would do in Q3…higher vol’s led to better gross margin (-7% vs -24% in Q2) and non-recur of ES6 launch costs and headcount reductions led to lower R&D / SG&A (-22% / -17% vs Q2). Net cash deterioration improved to -$300mln vs -$700mln in Q2. And unit volume has ticked up, with Dec implied at 2,950 (vs 2k in Aug / Sept and 2.5k in Oct / Nov). Shares are up nearly 70% over two trading days.
After significant underperformance in 2018, auto supplier stocks have on average performed in-line-with or better than the S&P500 YTD in 2019. This is unusual during the Peak-to-Trend phase of the Cycle. And particularly unusual in the context of continued downward estimate revisions. Broadly speaking, we believe that a repeat in 2020 is unlikely. Investors continue to under-appreciate the magnitude of headwinds that Automakers face in Europe over the near term and China over the Intermediate term. We already expect that this will lead to minimal (if any) 2020 earnings growth for most suppliers in our coverage universe.
Q3 was a “throwaway” quarter for many in the U. S. The GM Strike shaved up to 15% off of Supplier earnings for Q3, and it’s expected to shave up to 50% off of Q4. Investors largely ignored these downward revisions.
DOJ Investigating Ford Transmissions; We Continue to Look at Ford’s $2 bn Warranty Problem
Detroit Free Press reported that DOJ investigators are looking into Ford’s DPS6 transmissions. The implications are not yet clear. But we note that Warranty expenses have become a massive problem for this company. They’re already up $900 MM YTD. Expenses are now running $2 bn above long term average levels.
Mobileye Analyst Day (Part 2): This could be a game changer for AVs and Mobility as a Service
Want to know what was so impressive (and differentiated) about Mobileye’s Autonomous Vehicle demonstration in Jerusalem? This vehicle did everything that we have seen from the best in the business… Cruise, Argo, Waymo, Aptiv… and in a very complex environment. But this vehicle was merely equipped with cameras! There were no spinning lidars, radars, or other expensive devices mounted on the car’s exterior. The vehicle’s software was run on very inexpensive hardware (EyeQ4 chips).
We attended Mobileye’s inaugural analyst day in Jerusalem, where we were able to gather interesting insights into the outlook for semi-autonomous (L2+) driving technologies and capabilities that will expand dramatically over the next few years. Mobileye believes that they’ve had a 100% win rate on these systems (12 design wins to-date), which implies significant upside for Mobileye’s partners (primarily APTV but also MGA, Valeo, and ZF). We see potential for a $15bn addressable market for L2+ in 2025, double the current ADAS market. Also interesting, Mobileye highlighted that their proprietary REM based mapping technology has made great strides. They will fully map Europe / US by Q1 2020 / 2020YE. This technology will produce a major leap in functionality, and it provides a recurring revenue stream starting in 2020. We’ll have more on Mobileye’s unique AV / MaaS strategy in tomorrow’s Daily.
Uber: Q3 showed solid growth, margin progression, but margins taking a step back in Q4
Q3 revenue growth and EBITDA results were better-than-expected. Based on guidance, top-line remains strong in Q4 but margins take a step back. Improved segment and regional disclosure indicates there is a big gap between good markets and bad ones (particularly in Eats). We’d expect Uber to make some changes to the geographic portfolio that could help to achieve their newly-stated goal of full-year EBITDA profitability by 2021.
Mining the Filings: Our Q3 post-mortem on Tesla indicates most of the margin expansion was sustainable
We took a hard look at the reasons for the 360bp’s of gross margin expansion in Q3 (vs Q2) and see all but 100bp’s as sustainable. Overall very impressive as margins have now returned to 2nd Half 2018 levels even though overall ASP has fallen from around $70k to $57k.
- 1 of 4
- next →