General Motors (GM) is scheduled to report quarterly results before market open on Tuesday, October 25 with a conference call scheduled for 8:30 am EST, while Ford (F) is scheduled to report after market close on Wednesday, October 26 with a conference call scheduled for 5:00 pm EST. What to watch for:
GM SALES: In October, General Motors announced it sold 555,580 vehicles in the United States in the third quarter, up 24% year over year, based on "strong customer demand and improved availability." The company added: "Three of GM's vehicle brands posted double-digit total sales gains, with Chevrolet up 30%, GMC up 24% and Cadillac up 50%. GM and its dealers were able to translate improved semiconductor supplies, stable production and improvements in dealer inventory into a nearly 3-point improvement in retail market share year over year, as well as significant sales gains in the commercial fleet market." GM reported "record" quarterly sales of the Chevrolet Bolt EV and Bolt EUV, which totaled 14,709 units combined. "In response to unprecedented customer demand, GM plans to increase calendar-year production for global markets from approximately 44,000 vehicles in 2022 to more than 70,000 in 2023," GM said. The company also said it ended the third quarter with 359,292 vehicles in dealer inventory, including units in-transit, an increase of 111,453 units from the previous quarter and "nearly three times the inventory available at the end of the third quarter of 2021, when COVID-related supply chain issues impacted production."
GM PARTNERSHIPS, INITIATIVES: In July, GM and Pilot Company announced a collaboration on a national DC fast charging network to be operated by EVgo (EVGO). The company also announced in July that GM Defense was selected to provide a battery electric vehicle to the U.S. Army for analysis. Additionally in July, BrightView purchased 100 electric-powered Chevrolet Bolt EUVs and GM entered a long-term lithium hydroxide supply agreement with Livent (LTHM). In August, the automaker announced plans to double its Super Cruise road network and partnered with American Rheinmetall Vehicles for an Army truck program. In September, GM executed a share repurchase transaction with Stellantis (STLA) and selected Lear (LEA) to provide electrification technologies for its Ultium platform. Additionally in September, Hertz (HTZ) and GM announced an agreement in which Hertz plans to order up to 175,000 Chevrolet, Buick, GMC, Cadillac and BrightDrop EVs over the next five years. The company also made a strategic investment in Lithion’s Series A financing in September and announced plans to invest $760M in its Toledo, Ohio propulsion plant. GM also entered a partnership with OneD Battery Sciences for electric vehicle battery research and development in September.
ANALYST VIEW: In October, UBS analyst Patrick Hummel downgraded General Motors to Neutral from Buy with a price target of $38, down from $56. The analyst continues to like GM's electric vehicle momentum in 2023 with a "strong" launch pipeline but says the overall sector outlook for 2023 is "deteriorating fast so that demand destruction seems inevitable at a time when supply is improving." This will likely lead to a "paradigm shift" from under- to over-supply and consequently, a price and mix led drop in margins, Hummel tells investors in a research note. He expects GM's earnings to more than halve next year and says the "rapidly deteriorating top-down picture" makes it unlikely that the shares will move higher over the next 6-12 months.
FORD SALES: In August, Ford reported July U.S. sales up 36.6% year-over-year to 163,942 vehicles. The company said, at the time, "Ford was America's best-selling brand in July powered by strong demand across our lineup. Our overall sales rose 37 percent in July and electric vehicle sales grew at three times the rate of the EV segment. F-Series hit the 60,000-truck mark for the first time this year, with our all-new electric F-150 Lightning having its best sales month yet. Ford SUVs were up 70 percent, while E-Transit leads the electric van space with 95 percent of the electric van segment." In September, Ford reported August U.S. sales up 27.3% to 158,088 vehicles. "Ford is America's best-selling brand for the second month in a row. While sales for the overall industry were up 4.8% over a year ago, Ford grew at a faster pace of 27.3% for the month. Ford total market share increased 2.4 percentage points from August of last year to its current level of 13.4% for the month," the company stated. In October, Ford reported September U.S. vehicle sales down 8.9% to 142,644 vehicles. "Ford continued to see high-demand vehicles turning at record rates in September, while developing electric truck and van leadership and extending our overall truck leadership. Demand remains strong with new retail orders rapidly expanding. We are very pleased with the work from our dealers, employees and the area's first responders, as they are working tirelessly to recover in Florida from Hurricane Ian,” the company said. Additionally in October, Ford reported Q3 China sales down 11% year-over-year to 133,000 units.
FORD PARTNERSHIPS, INITIATIVES: In July, Ford announced a series of initiatives for sourcing battery capacity and raw materials that light a path to reach its targeted annual run rate of 600,000 electric vehicles by late 2023 and more than 2M by the end of 2026. The company signed an MOU with Rio Tinto (RIO) in July to develop battery and low carbon materials supply chains as well as agreements with Rio, BHP (BHP) and Compass Minerals (CMP) for nickel sourcing. In August, FedEx Office (FDX) announced a pilot of ten Ford E-Transit vans across its SameDay City Network and Ford raised the price on its F-150 Lightning due to “significant material cost increases”. The company also entered a clean energy agreement with DTE Energy (DTE) in August and announced plans to pilot vehicle-to-grid charging with Duke Energy (DUK). In September, Ford announced it would invest $700M in its Kentucky plant to build pickup trucks.
ANALYST VIEW: In October, UBS analyst Patrick Hummel downgraded Ford Motor to Sell from Neutral with a price target of $10, down from $13. Ford ranks behind Stellantis and General Motors in terms of North American EBIT margins and in light of the likely recession, has the highest risk of "testing break-even points," Hummel said. The analyst sees Ford's auto adjusted EBIT margin dropping by half year-over-year to 3.6% and on that basis, adjusted free cash flow falling to around break-even level. The company's European business could become loss-making against a difficult macro backdrop, a potential setback to the restructuring achievements already made, wrote the analyst. In addition, he doubts that the separation of Model E from Ford's legacy business at the end of 2022 "will do much more than just add transparency." Hummel sees it as a value- neutral event on a 12-month basis. Ford has one of the least attractive risk/reward profiles amongst Western car makers on a 12-month view, he said.
Duke Energy
-0.07 (-0.08%)
DTE Energy
-0.85 (-0.79%)
FedEx
+1.95 (+1.27%)
Compass Minerals
-0.54 (-1.35%)
BHP Group
-0.88 (-1.75%)
Rio Tinto
-1.04 (-1.87%)
Hertz
+0.25 (+1.40%)
Lear
+2.57 (+1.99%)
Stellantis
+0.27 (+2.07%)
Livent
-0.56 (-1.84%)
EVgo
-0.27 (-3.63%)
General Motors
+0.25 (+0.71%)
Ford
+0.09 (+0.74%)