Dauch (DCH) is facing softer-than-expected Ram heavy-duty production and inflationary cost pressures, BofA Securities said in a note Thursday.
The investment firm said the Stellantis (STLA) brand represents about 11% of Dauch's sales, while Ram heavy-duty is Dauch's second-largest platform after General Motors' (GM) T1xx.
BofA noted that S&P has decreased Q3 Ram heavy-duty production estimates by 7% since July, which BofA said "reflects softer near-term sales with diesel prices nearing all-time highs."
Also, "elevated inventory (118 days supply) likely restrains a significant production ramp," BofA said, adding that GM's T1xx platform will likely not be enough to offset the softer Ram production in the near term.
BofA also sees an estimated $15 million to $25 million of Q3 EBITDA pressure versus Dauch's prior outlook and risk to consensus estimates, driven by higher logistics and input costs as well as higher launch and supply-chain costs for GM's new truck platform.
BofA downgraded Dauch to underperform from buy and lowered the company's price target to $5 from $10.
Price: 5.09, Change: -0.10, Percent Change: -1.93
