Inflation, supply problems threaten profits in 2022

The world headquarters of General Motors is seen at Detroit’s Renaissance Center.

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DETROIT – Wall Street analysts are increasingly concerned that higher costs and supply chain disruptions will weigh on 2022 earnings for Synthetic engine and Ford Motor – even more than initially expected.

Ahead of the Detroit automakers’ first-quarter earnings report this week, several analysts cited such issues, including inflation and parts disruptions caused by the coronavirus pandemic. and war in Ukraineas a concern for companies and the broader automotive industry.

JPMorgan analyst Ryan Brinkman on Monday slashed both GM and Ford’s first-quarter estimates for a second time.

“Commodity prices have stabilized but remain high and volatile, and suppliers are certainly asking GM and Ford to offer higher prices to offset a range of supply chain costs,” he said. non-commodity demand is increasing.

JPMorgan now expects GM’s first-quarter earnings per share of $1.52, down from $1.58 and below the $1.68 average in forecasts compiled by Refinitiv. It lowered its forecast for Ford to 41 cents per share, down from 52 cents but slightly above the 38 cents per share Refinitiv had expected.

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

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

At the beginning of March, Ford reaffirms its expectations pre-tax profit from 11.5 billion USD to 12.5 billion USD in the year. However, supply chain issues have only gotten more complicated since then, according to analysts.

GM previously forecast pre-tax profit of $13 billion to $15 billion for 2022, but Evercore ISI said it’s “not entirely clear” whether the company will experience a “potentially small cut” to its top-level guidance.. GM has less exposure to Europe than Ford and other automakers but continues to face supply chain problems in China and North America.

Overall, many auto companies’ initial guidance is “over-optimistic” given the many issues facing the auto industry, said BofA Securities analyst John Murphy.

“With the ongoing global semiconductor shortage, the growing outbreak of Covid-19 and the subsequent shutdown in Asia, geopolitical tensions increased due to the invasion of Ukraine and various other incidents,” he said. In other supply chain breakdowns, sentiment across the industry (businesses, investors, etc”) remains very cautious,” he wrote last week in an investor note.

Europe-based BofA analyst Horst Schneider on Tuesday downgraded Stellantis from “buy” to “neutral” due to exposure to Europe and supply chain issues.

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

– Michael Bloom of CNBC contributed to this report.

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