) -- The impact of Europe's economic decline will be closely watched as U.S. global transportation companies report earnings -- particularly on July 26, when
(F - Get Report)
(UPS - Get Report)
(DAL - Get Report)
Each has a major presence in Europe. Ford is Europe's second-largest automaker. UPS is the leading U.S. overnight package company in Europe, while
(FDX - Get Report)
has a bigger presence in Asia. Delta has the largest trans-Atlantic system of the U.S. airlines.
Among them, Ford appears to have the most exposure. The automaker has already said it
about $570 million in Europe in the second quarter.
(GM - Get Report)
last week removed the head of GM Europe and temporarily replaced him with Vice Chairman Steve Girsky. GM is expected to have losses in Europe when it reports second-quarter results on Aug. 2.
In a recent report, UBS analyst Colin Langan wrote that Ford's European losses are already priced in to the share price. Partially as a result, "Ford offers better risk/reward than GM," he said. Since Ford's June 28 announcement of its projected losses, its shares have declined 6%, while GM shares have been flat.
Ford is outperforming GM in North America, where its production is up 4% to GM's 2%, with Ford's increase disproportionately including profitable full-size pickup trucks, Langan said. In Europe, he expects single-digit production declines for both companies.
"Near-term upside could be limited given EU headwinds," he wrote. His full-year earnings estimates are $1.45 a share for Ford and $3.60 for GM, while analysts surveyed by Thomson Reuters estimate $1.31 for Ford and $3.21 for GM.
Still, Langan has buys on both companies due to low valuations. Meanwhile, S&P Capital IQ analyst Efraim Levy has a buy on Ford, but on Tuesday he reduced his full-year estimate to $1.34 a share and his 12-month price target to $13 "to reflect deteriorating performance in certain international markets, particularly Europe." Ford lost market share in Europe in June, Levy wrote.
As for GM, analysts estimate second-quarter earnings of 76 cents a share. Jefferies analyst Peter Nesvold estimates 75 cents, noting in a report that "GM has posted an annual loss in Europe for the past 12 years in a row, totaling $12.4 billion in losses, (while) Ford has earned a profit in the past seven out of eight years in Europe, for a cumulative $2.95 billion profit."