{"id":41762,"date":"2023-07-28T18:15:35","date_gmt":"2023-07-28T22:15:35","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/general-motors-is-next-up-to-face-labor-strife-it-could-present-a-buying-opportunity-in-the-stock\/"},"modified":"2023-07-28T18:15:37","modified_gmt":"2023-07-28T22:15:37","slug":"general-motors-is-next-up-to-face-labor-strife-it-could-present-a-buying-opportunity-in-the-stock","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=41762","title":{"rendered":"General Motors Is Next Up to Face Labor Strife. It Could Present a Buying Opportunity in the Stock."},"content":{"rendered":"
\n
<\/p>\n
<\/p>\n<\/figure><\/div>\n

The Summer of Strikes\u2014or at least labor strife\u2014is upon us, and it\u2019s creating buying opportunities for nimble investors in stocks like
\n United Parcel Service.<\/span>\n <\/p>\n

It\u2019s impossible to miss the headlines about possible work stoppages, massive wage increases, and other worker-related issues. Screenwriters and actors are striking, while UPS (ticker: UPS) just reached a five-year labor deal with the International Brotherhood of Teamsters that would raise wages by roughly 30% cumulative over five years. Now
\n General Motors
\n (GM) is in the crosshairs as it negotiates with the United Auto Workers.<\/p>\n

\n

Both the possibility of a strike and reaching a deal can create problems for stocks as investors first ignore the possibility of a work stoppage, then worry about one happening, and then worry about the higher costs of a new contract. There isn\u2019t a lot of positivity surrounding labor negotiations. <\/p>\n

Just look at UPS stock. Its shares underperformed
\n FedEx
\n (FDX) by as many as four percentage points in recent weeks since the Teamsters authorized a strike in late June, but then outperformed FedEx heading into this past week\u2019s trading. Then came the deal and UPS is back to trailing FedEx by about three points after its stock fell 1.9% on the day of the announcement.<\/p>\n

It doesn\u2019t have to be all doom and gloom for UPS. For starters, labor is an important and necessary cost of doing business, and a deal should be viewed as good news if it helps avoid a costly strike. Yes, there are concerns about higher costs. Teamsters President Sean O\u2019Brien floated a $30 billion figure related to increased wages, significant for a business that generates about $100 billion in sales each year. But O\u2019Brien\u2019s figure is the cumulative increase over the life of the contract. It works out to an average annual wage increase of roughly 5% to 6% a year. <\/p>\n

That might still sound high to investors, but it hasn\u2019t shown up in earnings estimates yet. Analysts left their 2024 and 2025 earnings projections unchanged, though they might move numbers after hearing from UPS management on the company\u2019s second-quarter earnings conference call slated for Aug. 8. <\/p>\n

Just don\u2019t expect them to change much. No one was expecting wages to grow by 1% or 2% in the new contract when inflation has been raging for years. \u201c[We] believe UPS\u2019 management team wouldn\u2019t do a deal that restricts the company\u2019s ability to achieve profitable growth,\u201d writes Deutsche Bank analyst Amit Mehrotra, who has a Buy rating and a $212 price target for the stock. <\/p>\n

With the UPS deal mostly done\u2014union member voting runs through most of August\u2014investors can turn their attention to the UAW negotiations. The union\u2019s labor deals with GM,
\n Ford Motor
\n (F), and
\n Stellantis
\n (STLA) all expire in September, and the parties are talking now. Don\u2019t be surprised if GM stock comes under pressure soon. When the auto maker suffered a strike in 2019, shares underperformed the
\n S&P 500
\n by almost seven percentage points in August, the month auto negotiations typically heat up. They dropped again in September as the UAW strike began. When a deal was finally reached in late October, GM rallied and outperformed the S&P 500 in November and December.<\/p>\n

If history repeats, it should be viewed as a buying opportunity, writes BofA Securities analyst John Murphy, who has Buy ratings on GM and Ford. His GM stock price target is $72 a share, up 88% from a recent $38.34, and he has a $22 target on Ford, up 67% from a recent $13.16.<\/p>\n

This too shall pass. <\/p>\n

Write to <\/strong>Al Root at allen.root@dowjones.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Summer of Strikes\u2014or at least labor strife\u2014is upon us, and it\u2019s creating buying opportunities for nimble investors in stocks like United Parcel Service. It\u2019s impossible to miss the headlines about possible work stoppages, massive wage increases, and other worker-related issues. Screenwriters and actors are striking, while UPS (ticker: UPS) just reached a five-year labor […]<\/p>\n","protected":false},"author":1,"featured_media":41763,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-41762","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nGeneral Motors Is Next Up to Face Labor Strife. 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