Goldman Remains Cautious On Auto Sector Despite Many Earnings Beats

The majority of Q1 auto industry earnings are now out, and the results have been pretty positive overall. Goldman Sachs analyst Patrick Archambault, however, remains cautious on many auto stocks, despite 12 Q1 beats in the space so far versus only two misses.

The market has generally reacted indifferently to auto beats this quarter, delivering an average 1.0 percent gain for auto supplier stocks following a number of impressive beats.

“The largest share movements were in Dealer stocks (+9% on average on reporting day)where short positioning given weaker-than-expected SAAR and TX concerns was cought off-side by generally better-than-expected results,” Archambault notes.

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Tenneco Inc TEN, Lear Corporation LEA and Cooper Tire & Rubber Co CTB are three of the most recent auto names to report Q1 earnings beats, but he sees limited upside remaining in all three stocks.

Goldman has upped its price target for Tenneco from $46 to $57 on improved CPV, but maintains a Neutral rating on the stock.

The firm also raised its target for Lear from $107 to $122 after the company delivered a beat and raise powered by impressive margins. However, Goldman again maintains a Neutral rating.

Finally, Archambault acknowledges impressive Q1 margins for Cooper Tire as well, but was disappointed with the company’s North American volumes. Goldman lowered its price target from $39 to $38 and maintains a Neutral rating.

Disclosure: the author holds no position in the stocks mentioned.