Despite macroeconomic uncertainties, the auto industry is experiencing growth. This is due to the increased customer demand, a growing transition to Electric Vehicles (EVs), and a rise in government incentives.
Considering these factors, it could be wise to buy fundamentally strong auto stocks Oshkosh Corporation (OSK), Nissan Motor Co., Ltd. (NSANY), and Wabash National Corporation (WNC) for potential profits.
Before diving deeper into their fundamentals, let’s discuss why the auto industry is well-positioned for growth.
The increased use of environmentally friendly transportation options is causing the auto sector to expand. This shift toward sustainability has led to substantial investments in research and development (R&D) by automakers. Electric vehicles are projected to be the driving force behind the industry's future growth.
According to ABI Research, global vehicle sales are forecasted to rise by 3.6% in 2024 and reach over 90 million units in 2025, matching the previous peak. The growing prominence of EVs is a major trend in the automotive industry.
The automotive industry is witnessing substantial growth potential, primarily driven by the global shift toward EVs. This trend is further bolstered by favorable government policies, automaker commitments to EVs, and growing concerns about climate change.
Furthermore, the global automotive market is expected to grow to $3.27 trillion by 2028, expanding at a CAGR of 3%.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Auto & Vehicle Manufacturers picks, beginning with the third choice.
Stock #3: Oshkosh Corporation (OSK)
OSK designs, manufactures, and markets specialty trucks and access equipment vehicles worldwide. It operates through four segments: Access Equipment; Defense; Fire & Emergency; and Commercial.
On October 11, OSK announced a strategic partnership with Manufacture 2030 to work toward establishing science-based targets for reducing GHG emissions. In the first phase, it is set to provide the Manufacture 2030 platform to its top 300 suppliers to help reduce carbon emissions and operational costs. OSK is strongly committed to sustainability and is actively expanding its electric vehicle offerings.
On June 1, OSK announced the production of its 20,000th Joint Light Tactical Vehicle (JLTV), demonstrating its commitment to serving the U.S. Armed Forces with highly capable tactical wheeled vehicles. Tim Bleck, Senior VP and President at OSK Defense predicted continued success in delivering the JLTV despite supply chain challenges and a global pandemic.
In terms of the trailing-12-month Return on Total Capital, OSK’s 11.20% is 62.7% higher than the 6.88% industry average. Likewise, its 3.34% trailing-12-month Capex/Sales is 14.3% higher than the 2.93% industry average. Additionally, its 1.20x trailing-12-month asset turnover ratio is 48% higher than the 0.81x industry average.
OSK’s net sales for the fiscal second quarter that ended June 30, 2023, increased 16.8% year-over-year to $2.41 billion. Its gross income rose 71.9% from the prior-year period to $424.50 million. Also, the company’s adjusted net income and adjusted earnings per share increased 449.8% and 449% from their year-ago values to $176.50 million and $2.69, respectively.
Street expects OSK’s EPS and revenue for the quarter ended September 30, 2023, to increase 123% and 18.9% year-over-year to $2.23 and $2.46 billion, respectively. Over the past year, the stock has gained 21% to close the last trading session at $93.65.
OSK’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #25 out of 51 stocks in the B-rated Auto & Vehicle Manufacturers industry. It has an A grade for Value and a B for Growth and Momentum. To see OSK’s Stability, Sentiment, and Quality ratings, click here.
Stock #2: Nissan Motor Co., Ltd. (NSANY)
Headquartered in Yokohama, Japan, NSANY manufactures and sells vehicles and automotive parts worldwide. It sells vehicles under the Nissan and Infiniti brands. The company offers vehicle and vehicle parts; engines, manual transmissions, and multiplier/reducer units; automotive parts; axles; and other related components.
On September 26, NSANY announced its commitment to achieving a 100% electric vehicle lineup in Europe by 2030, with all new NSANY models in Europe being all-electric starting now. This move aligns with NSANY’s focus on electrification and supports its drive toward carbon neutrality.
NSANY also revealed plans to introduce cobalt-free technology to reduce EV battery costs, launch vehicles with All-Solid-State Batteries (ASSB), and expand its electrified vehicle offerings. Furthermore, NSANY aims to reduce charging times and battery costs significantly, with the goal of achieving cost parity between EVs and gasoline vehicles in the future.
In terms of the trailing-12-month Capex/Sales, NSANY’s 11.19% is 247.9% higher than the 3.22% industry average.
NSANY’s net sales for the first quarter ended June 30, 2023, increased 36.5% year-over-year to ¥2.92 trillion ($19.52 billion). The company’s operating income increased 98.1% year-over-year to ¥128.60 billion ($859.55 million).
Its net income attributable to owners of parent increased 123.9% year-over-year to ¥105.48 billion ($705.02 million). In addition, its EPS came in at ¥26.93, representing an increase of 123.7% year-over-year.
Analysts expect NSANY’s revenue for the quarter ended September 30, 2023, to increase 21.3% year-over-year to $20.90 billion. Its EPS for the fiscal year ending March 31, 2024, is expected to increase 65.4% year-over-year to $1.39. Over the past year, the stock has gained 34.8% to close the last trading session at 8.22.
It’s no surprise that NSANY has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It has an A grade for Growth and a B for Value. Within the same industry, it is ranked #24. To see NSANY’s Momentum, Stability, Sentiment and Quality ratings, click here.
Stock #1: Wabash National Corporation (WNC)
WNC designs, manufactures, and distributes connected solutions for the transportation, logistics, and distribution industries. The company operates through two segments: Transportation Solutions and Parts & Services.
On September 18, WNC announced a multi-year agreement with Rockland Flooring for laminated wood trailer flooring, enhancing their supply surety.
Richard Mansilla, VP of Global Procurement at WNC, said, “As our new dry van trailer manufacturing facility reaches full capacity in 2024, poised to yield an additional 10,000 units annually, this agreement will allow us to secure wood flooring above what we can produce out of Wabash’s wood flooring production facility in Harrison, Arkansas.”
On August 25, WNC hosted a ribbon-cutting event for its advanced dry van trailer manufacturing facility in Lafayette, Indiana, representing a significant investment and capacity expansion. The new facility uses advanced tech to double production and add 10,000 dry van trailers annually, with full impact by 2024.
WNC’s President and Chief Executive Officer Brent Yeagy predicts that the project reflects what the company can achieve through reimagining manufacturing, emphasizing upgrades in capacity, efficiency, and worker safety.
In terms of the trailing-12-month net income margin, WNC’s 7.75% is 25.2% higher than the 6.19% industry average. Likewise, its 10.84% trailing-12-month EBIT margin is 10.6% higher than the industry average of 9.80%. Furthermore, the stock’s 3.46% trailing-12-month Capex/Sales is 18.1% higher than the industry average of 2.93%.
For the fiscal second quarter ended June 30, 2023, WNC’s net sales increased 6.8% year-over-year to $686.62 million. Its gross profit rose 93.5% over the prior year quarter to $151.03 million.
The company’s adjusted net income attributable to common shareholders increased 229.6% year-over-year to $74.33 million. Also, its adjusted EPS came in at $1.54, representing an increase of 234.8% year-over-year.
For the quarter ended September 30, 2023, WNC’s EPS and revenue are expected to increase 40.2% and 3.6% year-over-year to $1.02 and $678.70 million, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 30.8% to close the last trading session at $21.63.
WNC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
Within the Auto & Vehicle Manufacturers industry, it is ranked #18. It has an A grade for Value and a B for Quality. Click here to see WNC’s Growth, Momentum, Stability, and Sentiment ratings.
What To Do Next?
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NSANY shares were trading at $8.29 per share on Monday afternoon, up $0.07 (+0.85%). Year-to-date, NSANY has gained 33.89%, versus a 15.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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