The US auto sector could be on the verge of turning off its bumpy road in the foreseeable future, and earnings and guidance from the likes of Tesla, Ford, GM and others in the coming weeks will be closely watched for signs, while regulatory and policy uncertainties may also clear.
Increasingly investors are wondering if the industry has bottomed out, said UBS analyst Joseph Spak, noting a growing contingent of clients seeing a bull case.
"In our view, auto stocks work on revisions and rate of change," he said in a note to clients. "For the first time in over a year, we see the case for positive North American production revisions at some point."
However, Spak says he expects guidance will mostly be for production volumes to be down 1-2%, with most companies likely to suggest that 2025 will be a second-half-weighted year.
While auto suppliers "should be able to" grow organically at low single digits, a stronger dollar will be a headwind and so "it may be a bit early to get overly enthused on the group".
For the automobile manufacturers, "Europe remains a big unknown" among investors and management teams Spak speaks to, which could mean a stronger US market leads to home bias on domestic auto stocks.
"There are still a number of macro, regulatory and policy uncertainties," the analyst wrote, including incoming president Donald Trump making the removal of consumer EV credits an early priority, "but as some of those factors become clearer over the coming months, stocks (with valuations near multi-year lows) could catch a bid."
GM, Ford, Tesla and Rivian
On individual stocks, UBS forecasts General Motors Company (NYSE:GM) will deliver a "fairly sizeable beat" for fourth-quarter earnings but keep 2025 adjusted net income guidance unchanged at $13-$15 billion.
UBS has a 'buy' on the shares at current levels, but does have some concerns over "the optics of the setup," as a strong Q4 might mean 2025 guidance "will look down" because of pricing headwind assumptions and "we wonder how this messaging will be received".
For Ford Motor Company (NYSE:F), "the entire focus" for Wall Street in results will be on 2025 guidance, where the consensus is currently for $9.1 billion, but UBS sees guidance of around $7-$9 billion and says Q1 estimates "look too high" with its forecasts 34% lower than the consensus given production downtime.
The shares setup going into the earning is also seen as "tricky" as a number of investors believe the guidance could be below the UBS expected range, and additionally, the analysts believe Ford will pay a special dividend of about $0.10 per share in Q1 "that investors may hang around for".
The UBS view on Tesla Inc (NASDAQ:TSLA) is "neutral to positive", with its 1.77 million deliveries for the whole of last year was the first annual decline in in the company’s history but Musk having guided to 20-30% growth for 2025 and the call offering "an opportunity for Musk to speak about what he wants to speak about", including full-self-driving, robotaxis and more.
For the Q4 earnings, the consensus forecast is for $0.77 adjusted EPS on total automotive revenue of $21.6 billion and total revenue of $27.49 billion.
The production guidance from Musk "seems ambitious to us," says Spak, adding that "in the interim, we believe numbers matter very little for TSLA given AI/robotaxi enthusiasm" and he will be looking for more information on new vehicle launches, FSD progression, a pilot robotaxi program, construction of energy storage facility in China and installed compute capacity.
Rivian Automotive Inc (NASDAQ:RIVN) has already reported deliveries of around 13K units which UBS predicts will translate to revenue of around $1.5 billion, which is above the current Street estimate of $1.4 billion.
If it exceeds $50 million in gross profit it would help unlock the path to receive a $1 billion equity investment from Volkswagen, with two non-consecutive quarters of this level needed or two consecutive quarters of at least $1 million.
UBS, which is "neutral to negative on the stock", expects guidance to be "pretty flattish" production, with deliveries flat to slightly down, and underlying loss guidance predicted to be around $2.2 billion, though the Street's estimates vary widely, from losses of $0.6 billion to $2.9 billion.