U.S. vehicle sales are seemingly on track for a big month this May, as automakers prepare to announce sales figures for the soon-to-be-concluded month on Tuesday. This, say analysts, may drive higher stock prices in the aftermath of these announcements.
The consensus shows May sales coming in at 1.59 million, which is down 1 percent year-over-year, though if seasonality is factored in, this would translate to an annualized rate of 17.3 million vehicles, according to auto industry researcher Kelley Blue Book. And while gasoline prices have increased slightly in recent weeks, a stronger U.S. economy and several Memorial Day specials have helped negate that, according to automotive analysts. For the year, most analysts expect vehicle sales to hit or approach 17 million for the whole of 2015, with pent-up consumer demand in the second half of 2015 possibly driving such a figure.
“We feel very comfortable with our estimation for 16.9 million units sold on the year,” said Kelley Blue Book analyst Alec Gutierrez. “With that being said, it looks like there is an increasing probability that sales will hit 17 million to 17.1 million units. After seeing the final tally for May, we will likely regroup, review the numbers, and potentially increase our forecast.” LMC Automotive senior vice president of forecasting Jeff Schuster also expressed his optimism for 2015 car sales, citing affordable gas, more flexible leasing options, and the overall age of the average consumer’s vehicle (10-11 years) as drivers that may help the industry get back “to a level we haven’t seen since 2001.”
All this could translate to higher share prices to come after automakers announce their May results on Tuesday. Currently, General Motors and Ford are undervalued at their present levels, with GM’s forward price-to-earnings ratio at 7.62 and Ford’s at 8.77 – both are far below the 17.4 ratio of the S&P 500. However, analysts also believe a strong month for auto could also help convince the Federal Reserve to raise interest rates sooner than expected. Currently, most analysts and economists foresee the first rate hike to take place in September or December of this year.