JP Morgan prefers Volvo over Traton ahead of Q3 on Europe and U.S. exposure
JP Morgan puts Volvo VOLVb.ST on positive catalyst watch (CW), predicting it to outperform peers in Q3, while it places Traton 8TRA.DE on negative CW, expecting a hit from volume effects and currency headwinds
The truck industry in Europe is experiencing an improving manufacturing with robust freight fundamentals and healthy utilisation levels, suggesting a replacement-driven market, the broker says
"Build vs order trends favour Volvo and DTG DTGGe.DE for 2H, while Scania (Traton) appears weaker," it adds
Despite resilience of the underlying freight activity in North America, the industry faces near-term volatility with weak order intake, high inventories, pricing uncertainties and the impending Section 232 ruling, JPM adds
"Recent order momentum shows a notable upswing for Volvo and International Motors (Traton), driven by new product launches," the broker notes
JPM expects Volvo to outperform peers due to better capacity utilisation and earnings momentum in Europe, lean inventories, new product launches in North America, and a high local U.S. footprint
As for Traton, the broker expects negative volume effects at Scania as well as in South America, and an impact on margins from currency fluctuations
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