UBS analyst Colin Langan remains bearish on Tesla (TSLA) following his teardown of a General Motors (GM) Chevy Bolt electric vehicle. Powertrain costs were lower than expected and with the help of falling battery costs, he sees more profitable economics for Tesla's Model 3. However, despite raising his gross margin assumptions and lowering his loss estimate for 2019, he believes Tesla's near-term challenges remain and his bearish thesis is intact. Langan reiterated his Sell rating, but raised his price target to $185 from $160, on Tesla shares.
After updating its software to include automatic emergency braking, or AEB at highway speeds, Consumer Reports says Tesla's "Model S is again Consumer Reports' top-rated ultra-luxury sedan." Reference Link
CEO Mary Barra says Q2 included softer industry sales in U.S., pricing challenges in China. Says returned $2.1B to shareholders in Q2. Plans to return up to $7B to shareholders by end of 2017 through dividends and buybacks, subject to market conditions. Remains "disciplined" on incentives. Sees "tougher" business environment in 2H. Sees North America EBIT adjusted margins of 10%+ for FY17. CFO Chuck Stevens says expects factory unit sales down about 150,000 units in 2H vs. 1H. Sees "strong" year of equity income in China. Expects decline in used car pricing will put pricing on GM Financial's residuals in 2H, but plans to deliver "solid" y/y earnings growth. Sees FY CapEx about $8B. Comments taken from the Q2 earnings conference call. GM is up about 0.75% to $36.10 in morning trading.
UP AFTER EARNINGS: McDonald's (MCD), up 3.1%... DuPont (DD), up 1.7%... Biogen (BIIB), up 4%... Caterpillar (CAT), up 5.2%... General Motors (GM), up marginally... JetBlue (JBLU), up just under 1%... AK Steel (AKS), up 5.1%... Freeport-McMoRan (FCX), up 2%... PACCAR (PCAR), up 3.4%... Centene (CNC), up 4.5%. DOWN AFTER EARNINGS: Alphabet (GOOG, GOOGL), down 3.2%... Seagate Technology (STX), down 17.2%... Anadarko Petroleum (APC), down 1.4%... United Technologies (UTX), down 1%... HCA Healthcare (HCA), down 3.6%... Quest Diagnostics (DGX), down 3.1%... Domino's Pizza (DPZ), down 2.8%... Eli Lilly (LLY), down 1.8%... Celanese (CE), down 2.3%. ALSO LOWER: Michael Kors (KORS), down 2.3% after announcing it will acquire Jimmy Choo PLC for $1.35B.
Revenue consensus $157.18B. GM sees FY17 adjusted auto free cash flow about $7B and FY17 EBIT-adjusted equal to or greater than FY16. Sees returning up to $7B in capital to shareholders through share repurchases of about $5B and dividends to about $2.2B. 2017 outlook shared in Q2 earnings presentation slides.
In the second quarter, GM delivered 725,000 total vehicles in the United States, driven by a 24% increase in retail crossover sales. The Q2 crossover results are the best in GM history. GM's U.S. daily rental sales were 6% of total vehicle sales in Q2, the lowest of any full-line automaker. Daily rental sales were down about 25,000 vehicles or 35 percent compared to Q2 2016. In China, GM deliveries of 852,000 vehicles set a second-quarter record, up 1.6% compared to Q2 2016. Strong sales of Cadillac and Baojun vehicles led the way, up 62 percent and 66 percent, respectively. South America delivered 160,000 vehicles in the quarter, up 18 percent, compared to industry growth of 13 percent.
In response to a tweet that Facebook (FB) CEO Mark Zuckerberg called his warnings against artificial intelligence "pretty irresponsible," Tesla (TSLA) CEO Elon Musk tweeted, "I've talked to Mark about this. His understanding of the subject is limited."
Ford (F) and General Motors (GM) are set to begin their earnings season with GM reporting fiscal second quarter earnings before the market open on Tuesday, July 25 with a conference call scheduled for 10:00 am ET. Ford is scheduled to report results of its Q2 results before the market open on Wednesday, July 26, with a conference call scheduled for 9:00 am ET. What to watch for: 1. GUIDANCE: When GM reported its first quarter results on April 21, it reaffirmed its fiscal 2017 adjusted earnings per share guidance of $6.00-$6.50, against an analyst consensus of $6.01, at that time. The company said, "For the year ending December 31, 2017 we expect to continue to generate strong consolidated financial results including improved total net sales and revenue, EBIT-adjusted and EBIT-adjusted margins that equal or exceed the corresponding amounts in 2016, ROIC-adjusted of greater than 25%, Automotive operating cash flow of approximately $12 billion, adjusted automotive free cash flow of approximately $6 billion, EPS-diluted of between $3.06 and $3.56 and EPS-diluted-adjusted of between $6.00 and $6.50. We expect these financial results to be driven in part by favorable shifts in mix for our new or refreshed product launches, including crossovers." On June 26, GM management said during a conference call that the previous EPS is still unchanged. Current consensus estimates sit at $6.07. When Ford reported its Q1 results on April 27, it backed its FY17 adjusted pre-tax profit guidance of about $9B. Ford noted, it continues to expect total company adjusted pre-tax profit to be about $9B, "also a platform from which to build stronger results for 2018, led by gains in the core business." Expect full-year cost efficiencies of nearly $3B to mostly offset costs outside of investments in emerging opportunities. During the Q1 earnings conference call, Ford's management said, they see Wurope profitable in 2017. 2. FORD CEO TRANSITION: On May 22, Ford confirmed that Jim Hackett will replace Mark Fields as chief executive officer on June 1. On that same day, Evercore ISI analyst George Galliers said retiring Ford CEO Mark Fields' nearly three years at the helm "has not been all plain sailing for the company, [but] has not been bad either." The market's initial reaction may be positive, given that its stock price is down 37% since Fields took over while General Motors slid 14% and Toyota (TM) dropped 3% during the same time frame, but incoming CEO Jim Hackett must quickly articulate his plans if investors are going to gain greater confidence, said Galliers, who keeps an In Line rating on Ford shares. On May 30, Auto News reported that the talks between Google (GOOGL, GOOG) and Ford, which fell apart, were the turning point for Fields' tenure as CEO and Hackett was named because of his favorable relationship with silicon valley. 3. RECALLS: On June 20, Ford announced that it was issuing a safety recall for approximately 402,462 2015-2017 Ford Transit van/bus vehicles with medium, long and extended wheelbases and chassis cab/cutaways with medium wheelbases to replace the driveshaft flexible coupling. 4. OPEL DIVESTITURE: On July 5, the European Commission has unconditionally approved the acquisition of GM's Opel unit by Peugeot (PUGOY), under the EU Merger Regulation. The Commission concluded that the transaction would raise no competition concerns in the relevant markets. Peugeot S.A. will acquire assets and shareholdings linked to Opel. PSA will thus acquire sole control of the whole of Opel. On June 26, GM announced during a conference call regarding its Opel/Vauxhall transaction as well as general industry trends in the U.S., General Motors executives said they continue to expect the sale of Opel/Vauxhall to close before year end, but warned of increased special charges: "I also wanted to take the opportunity today to update you on the special charge that will be associated with the transaction. We had originally guided to approximately $4B. We increased that guidance with Q1 earnings to $4.5B. We now expect it to be in the range of $5.5B."