Mr. Langan: From a macro perspective, the auto industry looks very good, particularly in the U.S. In Q1, auto sales were up significantly year-over-year and slightly up from the fourth quarter. I think we are on the right trajectory for the rest of the year, with continued improvement in sales into the second half of the year. From an earnings perspective, we also should see continued improvement going forward. The automakers and suppliers have restructured, enabling them to be profitable at much lower levels of production, so there should be good operating leverage as volumes recover. While the sales outlook is positive, I am more cautious on valuations. Looking across the sector, investors should be selective.
TWST: They should be selective because of the companies' current valuations?
Mr. Langan: Yes, from an earnings perspective, there is likely going to be continued good news through the rest of the year. However, at this point many stocks are already pricing in much of this recovery.
Tickers included in this excerpt: 005380, AN, BMW, BWA, F, HON, JCI, LEA, SAH, VOW
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