JPMorgan Likes GM In The Near Term, But Raises Tesla's Long-Term Estimates

JPMorgan sees first quarter earnings of General Motors Company (NYSE: GM) above consensus, while it trimmed near-term estimates of Tesla Motors Inc (NASDAQ: TSLA), albeit raising its long-term view.

General Motors

Analyst Ryan Brinkman raised GM's first-quarter EPS forecast to $1.08 from $0.95 and full-year 2016 EPS estimate to $6.05 from $5.75 on lower pension expense. The Street expects earnings of $1.01 a share for the first quarter and $5.46 a share for the full year.

"Based on IHS's mid-April forecast, we estimate GM production tracked stronger than expected in 1Q (+2 percent y/y vs. expectation of -1 percent at the time of 4Q earnings, which was predicated upon IHS's mid-January forecasts)," Brinkman wrote in a note to clients.

Related Link: Barron's: The State Of The U.S. Auto Industry

The production increase was driven primarily by South America and International operations, while North America and Europe were in line. The analyst maintained his Overweight rating on GM, but cut the price target by $2 to $45 due to the dilutive effect of recent investments in Lyft and Cruise Automation. The analyst said he do not see these investments to positively impact profits near- or medium-term.

Ford Motor Company

On Ford Motor Company (NYSE: F), Brinkman trimmed his first-quarter EPS estimate to $0.51 from $0.58, and 2016 earnings to $1.90 from $2.00 due to softer production in South America, a less rich mix of retail versus fleet sales in North America and lower profit from Ford Credit.

Wall Street expects earnings of $0.47 a share for the first quarter and $1.96 a share for the full year.

The analyst estimates that Ford's first quarter global production tracked 1,810K units (+10 percent y/y), in line with his prior expectation of 1,808K units, although stronger than the company issued guidance for 1,780K units at the time of fourth-quarter earnings.

Geographically, Asia Pacific and the Middle East and Africa saw strong growth, while North America and Europe were in line.

The analyst maintained his Overweight rating and $18 price target on Ford shares.

Tesla

Meanwhile, Brinkman slashed Tesla's first-quarter profit view on lower-than-expected deliveries. The analyst now estimates a loss of $0.60 versus a loss of $0.48 prior. The Street expects a loss of $0.59 a share for the first quarter.

Based upon Tesla's recent announcement that first-quarter deliveries tracked 14,820 units, the analyst updated his model relative to the 15,750 units he had forecast, with the effect being lower profits near term.

"Model S deliveries tracked 12,420 units in 1Q vs. the 12,750 we had modeled, while Model X tracked 2,400 units vs. our 3,000," Brinkman noted.

Brinkman now sees full-year combined Model S and Model X deliveries of 81,070 units lower than his earlier estimate of 82,000. Tesla's guidance calls for 80,000 to 90,000 units.

However, the analyst raised his long-term forecast of Tesla on higher Model 3 volumes, given stronger than expected initial interest. The analyst increased his Model 3 volume forecasts to 250,000 units in 2020 from 200,000 units.

Brinkman maintained his Underweight rating on Tesla, despite raising the price target to $170 from $155.

At Time Of Writing...

• Ford was recently seen trading up 1.21 percent at $13.41.
• Tesla was trading down 0.91 percent at $251.58.
• GM was trading up 1.76 percent at $31.86.