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We've scoured as many data-sources as we could find to provide a pre-earnings update on the latest trends. Bottom-line is that Food Delivery vol’s in many markets have moved above pre-COVID levels (vs expectations of flat) while Rides may be worse than the 50%-70% decline we modeled for Q2.
A tool for assessing the impact of global production on earnings
Given the risk to Global Economic Growth and Global Auto Production in 2020, we thought it would be helpful to provide a sensitivity model that allows our clients to input their own regional assumptions and assess the impact to Earnings and FCF across our U.S. coverage universe. Click here to download.
The risk to Fiat Chrysler from Italy’s escalating Coronavirus crisis
Italy announced over the weekend that it is applying new quarantine measures in response to the coronavirus outbreak. Italy is a 2.1 MM unit market (12% of EU sales), with the areas under quarantine accounting for 20% of the country’s sales. FCA has 25% market share in Italy. We assessed the implications for FCA of more negative assumptions for this particular market, while acknowledging that the implications are likely broader (i.e. macro impact across multiple markets).
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.
The big question heading into Thursday results was when revenue growth/EBIT metrics would start to inflect meaningfully higher. We see sizable potential tailwinds in the 2022-2025+ timeframe (especially as BWA integrates DLPH power electronics into its existing motor/electric drivetrain offerings). But we don’t see these propelling growth in 2020 or 2021. BWA’s strong FCF (10% FCF yield on 2020 numbers) should provide support at current levels. But we don’t yet see a near-term catalyst to support a re-rating of the shares.
We continue to believe that core US ride-share markets (dense, urban cities) will become saturated faster than investors expect. Lyft is over-exposed and revenue growth is slowing to low-to-mid 20% in 2H20 (based on guidance)…which seems too slow too soon. We also believe autonomous vehicle-based ride-share services will be strong competitors in the core cities sooner than expected.
We wanted to flag a few highlights in today's (02/12/20) Wolfe Research Auto Daily....
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