Why Mainstream Automakers Are Underperforming in 2Q17



1Q17 earnings for the auto industry 

All the key automakers (IYK) have reported their 1Q17 earnings. In this series, we’ll be analyzing and comparing those first-quarter earnings. General Motors (GM) and Fiat Chrysler Automobiles (FCAU) both reported positive YoY (year-over-year) first-quarter earnings growth of about 35.0% and 26.0%, respectively. However, Ford (F), the second-largest US automaker, fell about 43.0% YoY.

But before we analyze their 1Q17 earnings in detail, let’s take a quick look at their recent Wall Street performances.

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Weakness in auto stocks

During the 1Q17 earnings season, auto stocks were highly volatile with a negative bias. Investors’ concerns about weakening US auto sales could be the primary reason for the current pessimism on Wall Street.

As of May 25, 2017, GM has fallen about 7.8%, the most among its peers so far in the second quarter. Fiat Chrysler and Ford were also trading in negative territory with losses of about 3.2% and 6.7% QTD (quarter-to-date), respectively. Concerns about a slowdown in US auto sales could be the primary reason for this second-quarter weakness.

In contrast, stocks for Tesla (TSLA) and Ferrari (RACE) have risen about 13.8% and 15.3%, respectively, so far in 2Q17. That’s positive compared to the 2.2% rise for the S&P Index (SPY) on a QTD basis.

Series overview

Let’s move on now to take a closer look at mainstream automakers’ 1Q17 earnings and other key financial figures. That will include their 1Q17 sales volumes, revenues, and margins. After that, we’ll explore the key strengths of these auto giants and see what drove their earnings in the first quarter. Finally, we’ll compare their valuation multiples.

Let’s start by looking at some key highlights of Tesla’s first-quarter results.


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