Goldman Sachs analyst Mark Delaney is cautious on the US Autos sector ahead of the Q1 earnings season.
The analyst expects to see a difficult earnings season on expectations most companies will guide below the Street consensus amid supply chain and geopolitical headwinds.
The war in Ukraine has pushed costs of raw materials higher while the lack of key components resulted in some facility downtime.
"We believe that auto tier 1 suppliers in our coverage will be most impacted given their exposure to higher input costs, and to a lesser extent by lower revenue (recall that many suppliers in our coverage were generally conservative with global auto production volume assumptions for 2022, so we see less of a revenue impact on average)," Delaney said in a client note.
Given these challenges and headwinds, the analyst expects investors to become even more selective coming out of earnings.
When it comes to OEMs, Delaney prefers General Motors (NYSE:GM) to Ford (NYSE:F) given that the former has no material exposure to Europe, and GM had less units impacted in 1Q by semis than Ford (per IHS).
Goldman Sachs sees a risk to Ford's Q1 AND CY22 EBIT estimates. On the other hand, Delaney is positive on Tesla (NASDAQ:TSLA) after in-line Q1 deliveries were reported last weekend.
"We remain positive on Tesla for the full-year driven by strong EV demand, the company's leading ability to navigate the supply chain (e.g., Tesla has been able to find alternative suppliers more quickly in part due to its vertically integrated model), and increasing prices for its vehicles. However, the ongoing shutdown of its Shanghai factory due to COVID protocols in the city is a risk," the analyst added.
By Senad Karaahmetovic