Barclays' Takeaways On August Auto Sales

US light vehicle SAAR for August came in at 17.0 million, slightly below the consensus expectations of 17.1 million. Headline sales declined 3.5 percent y/y, while SAAR was down ~700k units y/y and ~900k q/q. Barclays' Brian A. Johnson mentioned three key takeaways from the results.

Three Takeaways

• Focus on decline: The August decline represented the fourth worst monthly headline sales result in the past six years. “We'd expect the media to fixate on this decline,” analyst Johnson wrote, while adding that this trend could persist in the months ahead, since monthly results between August and November are up against tough y/y comps.
• Fundamentals intact: Despite the decline, fundamentals seem to be “largely intact” on a sequential basis. Johnson noted that while incentive spend was elevated, it was still “in check,” and inventories were consistent.
• Volatility ahead: Auto shares could be volatile, while OEM stocks “should be okay for now,” the analyst commented.

Which Stocks Are Fine For Now

The trends in recent months indicate auto stocks facing “bouts of volatility” whenever data points are negative. This is the case even for stocks with depressed valuations. Johnson added, however, that despite this volatility, stocks of companies like Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM) “should be fine, perhaps even in the face of negative headline results.”

Ford and General Motors had reported sales largely in-line with expectations, while the headline results showed Ford sales down 9 percent and General Motors sales down 5 percent. Despite the negative headline results, both stocks underperformed the market only modestly on September 1, with Ford’s shares losing 1.3 percent and General Motors’ shares down 0.4 percent, versus S&P flat.

“We continue to expect Ford/GM to outperform vs. suppliers, and also potentially against other large cap dividend names,” the analyst stated.

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