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Home / Business / Ford, GM Earnings Preview: Burning cash will be a major focus of the second quarter

Ford, GM Earnings Preview: Burning cash will be a major focus of the second quarter



General Motors Co. and Ford Motor Co. plans to report second-quarter earnings this week, experiencing an unprecedented drop in car production and deeper concerns about demand for vehicles and other major tickets with the economic devastation associated with the coronavirus.

GM GM,
+ 2.45%
reports on Wednesday before the bell, Ford F,
+ 1

.15%
reports Thursday after the bell.

The automakers’ results stem from another quarterly explosion for US rival Tesla Inc. TSLA,
-4.09%,,
which last week published an unexpected GAAP and adjusted earnings.

“Forecasts for the automotive industry deteriorated before COVID-19 closed plants,” said David Kudla, CEO of Mainstay Capital Management.

At the end of 2019, investors and many in the industry feared that sales in 2020 would not be on par with sales in recent years, which were the time of banners for car sales.

“There is no doubt that carmakers suffered a significant blow during the second quarter, but active action on the balance sheet has allowed these companies to bear the brunt of this termination without injury,” he said in a note.

Here’s what to expect:

Earnings: The consensus of 18 Wall Street analysts surveyed by FactSet is demanding a $ 2.01 loss of GAAP per share of GM, which will offset GAAP’s $ 1.66 per share in the second quarter of 2019. after adjusted earnings of $ 1.64 per share a year ago.

For Ford, 19 analysts expect a GAAP loss of $ 1.26 per share, compared to EPS 4 cents in the second quarter of 2019. Analysts are demanding an adjusted loss of $ 1.17 per share for the quarter, compared to an adjusted earnings of 28 cents a share last year.

Estimate that the crowdsourcing platform, which collects estimates from Wall Street analysts as well as buying analysts, fund managers, company executives, academics and others, expects an adjusted loss of $ 1.61 per share for GM and $ 1.04 for Ford.

Income: Analysts polled by FactSet expect sales of $ 16.2 billion for GM, which is less than $ 36.1 billion a year ago. For Ford, the FactSet consensus is for sales of $ 19.4 billion, down from $ 38.9 billion a year ago.

The estimate sees revenue of $ 16.5 billion for GM, and $ 20.5 billion for Ford.

Stock movement: So far this year, GM shares have fallen 28% and Ford shares have fallen 25%. This compares to a loss of about 7% for the Dow Jones Industrial Average DJIA,
-0.77%,,
and break-even for the S&P 500 SPX index,
-0.64%
in the same period.

What to expect: Automotive fell an “unprecedented” 45% in the second quarter compared to the second quarter of 2019, analysts at Deustche Bank said in a note on Tuesday.

U.S. vehicle retailers have recovered closer to the previous COVID, but the recovery is creating uncertainty for prospects for automakers and related industries, they said.

As for GM, investors will be keeping a close eye on cash burning in the second quarter and the current capital structure, Kudla said.

The quarter’s burn is expected to range from $ 7 billion to $ 9 billion, but that figure is likely to be better due to better-than-expected late sales at the end of the second quarter, he said.

GM reported a 34 percent drop in quarterly sales earlier this month, but said retail sales “significantly” recovered in May and June from April.

Deutsche Bank analysts may also surprise Ford markets. This would be due to “stronger North American truck output in the quarter than originally expected and potential growth on Ford Credit from higher-than-expected residual values,” they said.

Goldman Sachs analysts also voiced a more positive note about Ford and GM in the last note. They point to improved sales forecasts; mixed transition to pickups and SUVs that offer better profits; and higher margins in business financing as one of the reasons for their better hopes.

“This means that we still expect weak two-tier turnover for both companies, given the difficult macroeconomic conditions in the quarter caused by COVID-19,” Goldman analysts said.


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