Goldman Lowers Estimates for GM, Ford; Raises Magna

Goldman Sachs has cut its earnings estimate for General Motors Corp. (GM) for the third quarter, arguing investors need to look beyond the new labor deal it signed with the United Auto Workers union and zero in on its weaker volumes and higher raw material costs.

Analyst Robert Barry reduced his estimate to US10¢ from US33¢. The consensus estimate is US51¢.

While GM will likely continue to make gains in its international business, its North American results will deteriorate year-over-year, the analyst said. He added that unlike in previous quarters, cost savings won’t be enough to offset headwinds in the quarter.

“The weak volume and a fading mix benefit is a clear signal to us that GM is at the peak of its product cadence,” Mr. Barry wrote in a note to clients. “In this context, Q3 may serve as a reminder that UAW-bestowed cost concessions are really measures intended to offset persistent risk to the top line.”

The analyst was more upbeat on Ford Motor Co. (F) and Magna International Inc. (MGA).

Ford, for which Goldman is acting as an advisor on one specific deal, will likely post third quarter earnings that beat current Wall Street expectations, he said, narrowing his projected earnings-per-share loss for Ford to US30¢ from a US54¢ loss.

As for Magna, Mr. Barry boosted his third quarter earnings estimate to US$1.30 from $1.26 because of better-than-anticipated business in some of its key vehicle platforms. Goldman rates Magna “neutral” with a 6-month price target of US$99.

GM vs. F vs. MGA 1-yr chart:

Comments

[kickrocks:]

headline doesn't match the material in this article re Ford...

2007 Oct 08 10:57 AM

[User 112444:]

Goldman Lowers Estimates for GM; Raises Ford, Magna

2007 Oct 10 12:29 PM