Inflation, supply problems threaten profits in 2022

General Motors’ world headquarters are located in Detroit’s Renaissance Center.

Paul Hennessy | LightRocket | Getty Images

DETROIT – There is growing concern among Wall Street analysts that higher costs and supply chain disruptions will put pressure on 2022 earnings for General Motors and Ford Motor – even more than originally expected.

Ahead of Detroit automakers’ first-quarter earnings reports this week, several analysts cited such issues, including inflation and sharing disruption caused by the coronavirus pandemic and the war in Ukraine, as concerns for businesses and the wider automotive industry.

JPMorgan analyst Ryan Brinkman on Monday trimmed first-quarter estimates for both GM and Ford for the second time.

“Commodity prices have since stabilized but remain high and volatile, and suppliers are certainly asking for higher prices from both GM and Ford to help compensate for a rising range of non-commodity supply chain costs,” he said.

JPMorgan now expects earnings per. stock in the first quarter for GM at $ 1.52, down from $ 1.58 and below the average of $ 1.68 for forecasts prepared by Refinitiv. It lowered its forecast for Ford to 41 cents per liter. share, down from 52 cents, but slightly higher than the 38 cents per share. share expected from Refinitive’s consensus estimates.

GM reports first-quarter results after the market closed on Tuesday, followed by Ford on Wednesday.

Evercore ISI said in a note to investors last week that they expect Ford to cut its 2022 outlook due to the growing number of problems the company is facing. It cited, among other things, the company’s exposure to supply chain problems in Europe due to the war and the increased cost of aluminum used in its best-selling F-Series pickups.

In early March, Ford confirmed its expectations for a pre-tax profit of between $ 11.5 billion and $ 12.5 billion for the year. However, supply chain problems have only become more complex since then, according to analysts.

GM previously predicted a pre-tax profit of $ 13 billion to $ 15 billion for 2022, but Evercore ISI said it is “not entirely clear” whether the company would like “a small potential cut” to its top-end guidance. GM has far less exposure to Europe than Ford and other automakers, but continues to experience supply chain problems in China and North America.

BofA Securities analyst John Murphy generally said that the initial guidance from many car companies is “now too optimistic” given the many problems the car industry is facing.

“Given the ongoing global shortage of semiconductors, gradual Covid-19 eruptions and subsequent shutdowns in Asia, increased geopolitical tensions due to the Ukraine invasion and an abundance of other supply chain disruptions, general mood across the industry (companies, investors, etc. .).) remains very cautious, “he wrote last week in an investor note.

European BofA analyst Horst Schneider on Tuesday downgraded Stellantis from “buy” to “neutral” because of its exposure to Europe and supply chain problems.

Stellantis, which was formed by the merger of Fiat Chrysler and France-based Groupe PSA in January 2021, is scheduled to release its first-quarter shipments and revenue on May 5th.

– CNBC’s Michael Bloom contributed to this report.

Leave a Comment