• 10 hours Even Banks Can't Answer Aramco's Trillion Dollar Question
  • 1 day Will Bezos Buy The Seattle Seahawks?
  • 1 day 6 Tech Trends Transforming The Travel Industry
  • 2 days Ousted Uber CEO Cashes Out $500 Million In Stock
  • 2 days Trump Prepares For Another Key Tariff Decision
  • 2 days The Free Money Bubble Is About To Burst
  • 3 days The Crushing Reality Of Poverty In America
  • 3 days Should You Buy Into The World’s Largest IPO?
  • 3 days The Infinite Possibilities Of Cosmic Energy
  • 4 days Analysts Link Walking To Economic Growth
  • 5 days Will Japan Turn Its Back On The Aramco IPO?
  • 6 days Global Debt Soars To $188 Trillion
  • 6 days The World's Largest Gold Miners Are Getting Creative
  • 7 days Twitter: The Saudi Spy Tool To Bring Down Dissidents
  • 7 days Broad Commodity Funds Don’t Give Enough Exposure To Gold
  • 8 days Here We Go Again: Another Giant Telecoms Mega-Merger
  • 8 days World's Largest Gold Miner Sees Profits Triple
  • 9 days Microsoft Japan Trials 4 Day Work Weeks, Productivity Soars By 40%
  • 9 days Hedge Funds Lose $4 Billion In Four Days As California Wildfires Rage On
  • 10 days New Viral App May Be A National Security Threat In Disguise
Analysts Link Walking To Economic Growth

Analysts Link Walking To Economic Growth

Overall, those health gains translate…

The Free Money Bubble Is About To Burst

The Free Money Bubble Is About To Burst

Globally, central bankers have cut…

The Crushing Reality Of Poverty In America

The Crushing Reality Of Poverty In America

A new study claims that…

  1. Home
  2. Markets
  3. Economy

Morgan Stanley Predicts First Slump In Global Auto Sales In 10 Years

Skyline

Morgan Stanley's auto analyst Adam Jonas - formerly one of the biggest Tesla cheerleaders - predicts that global auto sales will be down 0.3 percent year over year in 2019 and that many consensus estimates across the industry are far too optimistic. In a note released Thursday morning, Jonas predicts "lower guidance" coming out of Detroit automakers at the same time that the global auto market sees its first volume drop since 2009. And despite consensus forecasts predicting revenue and margin growth across the board, Morgan Stanley generally defied the trend, reiterating its cautious view on the US auto sector.

Jonas expects global volume in 2019 to fall to 82.1 million units versus 82.4 million units in 2018. His team also expects higher input costs, combined with rising rates and rising R&D expense, to further pressure 2019 numbers. Aside from the obvious (lack of volume growth), he predicts tariff related costs will still be an overhang for automakers heading into the new year.

Morgan Stanley also believes that industry consensus for 2019 earnings is too bullish. Currently, the consensus is for all companies to grow revenues by 1 percent and EBITDA by more than 3 percent, which implies a 24 basis points EBITDA margin expansion. Instead, Morgan Stanley expects flat revenues and EBITDA down 1 percent, which would signify a 13 basis point contraction of EBITDA margins.

Morgan Stanley also expects margins lower for all three Detroit automakers, despite the consensus expecting them to rise between 26 and 61 basis points. The delta between Morgan Stanley’s predictions and consensus margins is the widest for the following companies:

  • Ferrari (MS 184bps EBITDA margin decline vs. consensus +63bps)
  • Harley-Davidson (MS -307bps vs. consensus -39bps)
  • Delphi Tech (MS -229bps vs. consensus -127bps)
  • AutoNation (MS -75bps vs. consensus -3bps).

Tesla stands out as where Morgan Stanley's margin forecasts are furthest below consensus. Consensus for EBITDA margins is a rise of 359 basis points to 13.4 percent, while Morgan Stanley forecasts only a 7 basis point increase. Related: Tesla’s Tax Credit Promise Prompts Major Stock Slip

Here is a full chart showing Morgan Stanley's predictions versus consensus estimates:

On the positive side, there are 5 names (out of the 25 that Morgan Stanley covers) where Jonas' forecasts are more than 1 percent above consensus: HTZ, AXL, BWA, PAG, and KMX.

Morgan Stanley believes that the Detroit Auto Show is going to be where management teams take the opportunity to guide lower. The show starts on January 14. 

By Zerohedge 

More Top Reads From Safehaven.com

Back to homepage

Leave a comment

Leave a comment