Inflation and supply issues threaten 2022 earnings

General Motors World Headquarters is seen at the Renaissance Center in Detroit.

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DETROIT — Wall Street analysts are increasingly concerned that rising costs and supply chain disruptions will put pressure on General Motors and Ford Motor’s earnings in 2022 — even more than initially expected.

Ahead of Detroit automakers’ first-quarter earnings reports this week, several analysts cited those issues, including inflation and parts disruptions caused by the coronavirus pandemic and the war in Ukraine, as concerns for carmakers. businesses and the automotive industry in general.

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

“Raw material prices have since stabilized but remain high and volatile and suppliers are surely asking higher prices from both GM and Ford to help offset a growing range of non-commodity supply chain costs. raw materials,” he said.

JPMorgan now expects GM earnings per share of $1.52 in the first quarter, down from $1.58 and below the $1.68 average forecast compiled by Refinitiv. He lowered his forecast for Ford to 41 cents per share, down from 52 cents but slightly above the 38 cents per share expected by consensus estimates from Refinitiv.

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

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

In early March, Ford reaffirmed its expectation of pretax profit of between $11.5 billion and $12.5 billion for the year. However, supply chain issues have only grown more complex since then, analysts said.

GM previously forecast pretax profit of $13 billion to $15 billion for 2022, but Evercore ISI said it was “not entirely clear” whether the company would experience “a potential small reduction” in its high-end forecast. range. GM has far less exposure to Europe than Ford and other automakers, but continues to face supply chain issues in China and North America.

BofA Securities analyst John Murphy said that in general, many auto companies’ initial forecasts are “now too optimistic” given the litany of issues facing the auto industry.

“Given the current global shortage of semiconductors, incremental Covid-19 outbreaks and subsequent shutdowns in Asia, heightened geopolitical tensions due to the invasion of Ukraine and a plethora of other disruptions supply chain, the general sentiment in the industry (businesses, investors, etc.) remains very cautious,” he wrote in a note to investors last week.

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

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

– CNBC’s Michael Bloom contributed to this report.

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