Today we’re providing special updates on four stocks that have made significant moves since our last update: General Motors (GM), Mattel (MAT), Automatic Data Processing (ADP) and UPS (UPS).
General Motors (GM) Still Rated Buy
General Motors (GM) reported weak January sales results on Wednesday, and the stock is about 2% lower since our last update. GM sold 3.8% fewer cars and trucks this January, as both retail and fleet sales declined. Industry-wide, sales fell 1.8% but were slightly higher than expected.
On the bright side, GM’s average transaction price rose $1,200, to $34,500. GM opted to offer fewer incentives than in December, focusing on profitability over volumes. The company is also benefiting from the industry-wide shift from passenger cars to higher-priced trucks, SUVs and, above all, crossovers.
In 2017, GM expects retail sales of trucks, SUVs and crossovers to remain strong, while lower-margin fleet sales are expected to post further declines. GM has 10 new or redesigned crossovers on or entering the market this year.
The latest pullback in the stock has brought GM to its 50-day moving average, where I expect it will find support. We took some profits two weeks ago, and you can do the same if you’re sitting on a decent gain, but for long-term investors, GM is still rated Buy.
Mattel (MAT) Still Rated Hold
MAT is down another 2% since our last update. As noted in Wednesday’s update, Mattel’s margin issues appear transient, but we’ll still sell the stock if it fails to find support around 26. If analysts have lost faith in Mattel’s turnaround, the stock could revisit its 2015 low of 20 before leveling out. We’re watching the stock carefully.
Automatic Data Processing (ADP) Rating Changed to Hold
I covered ADP’s earnings report in Wednesday’s update, but since the market hadn’t opened yet, we didn’t know the stock’s reaction. Now that we do, I’m going to place ADP on Hold. The payroll processor’s earnings beat estimates by a wide margin, but revenues fell short because the company isn’t gaining new customers. And customer numbers are expected to stay flat for the next six months, which triggered a downward revision in 2017 revenue guidance. EPS guidance was unaffected, though, as management offsets the slowdown in signups by improving margins and growing revenue per existing customer.
ADP is now trading just above 95, where the stock consolidated for a bit in early December. It’s below its 50-day moving average but above its 200-day line. We’ll Hold to see if the stock can recover from this miss.
Sell UPS (UPS)
Finally, the bounce we were waiting for in UPS didn’t come, and we’re going to cut our tiny loss (currently about 1%) today. In addition to the stock’s horrendous reaction to the earnings miss, we’re discouraged by the long-term nature of UPS’ challenges, and the hit they’re expected to deliver to 2017 earnings. Sell UPS.