Barclays on U.S. Autos & Auto Parts: Lessons from August Sales

Barclays on U.S. Autos & Auto Parts: Lessons from August Sales

Barclays analyst, Brian A. Johnson, said, "US sales of light vehicles stalled at a 12.1mn unit SAAR (seasonally adjusted annual rate), down slightly from 12.1mn in July and in line with our estimate of 12.1 mn (in line with consensus). With other macro data points weak as well, the in-line sales rate did little to dispel the worries over the cause of the recent deterioration in underlying demand (lack of vehicle availability, higher pricing, weaker consumer). Nevertheless, we believe three important things emerge from August auto sales."

"Market continues to price in a significant probability of a double-dip. Overall, sales for August came in line with our and consensus estimates of 12.1 mn. At this rate, the sales are consistent with a stall scenario, but the market appears to be continuing to price in a significant (albeit diminishing risk) of a double dip. We see a 36% implied probability of a double dip, up from 12% at the end of July but down from 46% on August 19. Notably, Dana (NYSE: DAN), Lear (NYSE: LEA) and Tenneco (NYSE: TEN), along with Meritor (NYSE: MTOR), are closest to having priced in a double dip, with implied double dip probabilities from our simple regression model of around 50-55%.; of the OEMs GM (NYSE: GM) appears to be pricing in a higher, 39% probability of a double dip vs. Ford (NYSE: F) at 20%."

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