The electric vehicle (EV) boom isn't just turbocharging the fortunes of car manufacturers; it's also fueling a surge in demand for essential components and suppliers critical to the industry’s growth. This growing need sparks innovation and drives companies to develop more efficient, long-lasting, cost-effective batteries.
Amid this backdrop, it could be wise to scoop up the shares of under-the-radar electric vehicle suppliers like LyondellBasell Industries N.V. (LYB), Amkor Technology, Inc. (AMKR), and BorgWarner Inc. (BWA).
By 2024, one in four new cars on the road will be electric, with global sales hitting over 17 million units. This trend is expected to continue, with EVs forecasted to account for 46% of light-vehicle sales by 2025, growing to 68% by 2030 and 83% by 2035.
According to Statista, the market’s growth will be robust, leading to a projected volume of $906.70 billion by 2028, growing at a CAGR of 9.8%. Moreover, the Biden-Harris Administration’s $623 million investment in expanding EV charging infrastructure underscores the accelerating commitment to this sector. This boost encourages companies in this space to innovate and enhance EV technology even further.
As the industry evolves, it is driving a massive surge in demand for everything from advanced batteries to innovative automotive parts. In fact, the global demand for batteries is expected to quadruple to 4,100 gigawatt-hours (GWh) by 2030.
Considering these encouraging trends, let’s take a look at the fundamental aspects of the featured stocks in detail:
LyondellBasell Industries N.V. (LYB)
LYB is a global chemical company that creates solutions for everyday, sustainable living. The company operates in six segments: Olefins and Polyolefins Americas; Olefins and Polyolefins Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology.
On July 26, LYB launched its new Schulamid ET100 product line, a revolutionary polyamide-based compound for automotive interior structural solutions, such as door window frames. This latest addition highlights the company’s innovation in Engineered Polymers and expands its Engineered Plastics portfolio for the automotive industry.
On June 14, LYB unveiled a new production line at its Dalian facility in China, marking a significant expansion for its Advanced Polymer Solutions (APS) business. This latest addition, which will manufacture high-performance polypropylene compounds primarily for the automotive sector, doubles the site’s production capacity to 40,000 tonnes annually. This expansion strengthens LYB’s foothold in China and enables it to meet growing demand.
In terms of forward non-GAAP P/E, LYB is trading at 12.17x, 22.5% lower than the industry average of 15.69x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 1.02 and 0.77 are 40.4% and 43.9% lower than their respective industry averages of 1.71 and 1.37.
LYB’s sales and other operating revenues for the fiscal second quarter that ended June 30, 2024, increased 2.4% year-over-year to $10.56 billion, while its EBITDA stood at $1.64 billion, up 18.9% over the prior-year quarter. The company’s net income and EPS increased by 29.2% and 29.4% year-over-year to $924 million and $2.82, respectively.
Street expects LYB’s revenue for the fiscal fourth quarter (ending December 2024) to increase 1.6% year-over-year to $10.09 billion. Its EPS for the same period is expected to register a 43.3% growth from the prior year, settling at $1.81. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters, which is excellent.
Shares of LYB have gained 1.6% year-to-date to close the last trading session at $96.56.
LYB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
LYB has a B grade for Value and Stability. It is ranked #28 out of 80 stocks in the B-rated Chemicals industry. Click here to access the other LYB ratings for Growth, Momentum, Sentiment, and Quality.
Amkor Technology, Inc. (AMKR)
AMKR offers outsourced semiconductor packaging and test services across multiple regions, including the United States, Japan, Europe, the Middle East, Africa, and the Asia Pacific. The company provides a full suite of services, including wafer bumping, probing, back-grinding, package design, packaging, system-level and final testing, and drop shipment.
On July 26, AMKR signed a Memorandum of Terms with the US Department of Commerce to receive proposed funding under the CHIPS and Science Act. The funding will support the construction of AMKR’s first domestic OSAT (outsourced semiconductor assembly and test) facility, set to become the largest of its kind in the United States.
In the same month, AMKR and Infineon Technologies AG (IFNNY), a leader in power systems and IoT, signed a Memorandum of Understanding to advance decarbonization and sustainability strategies across the supply chain. Both companies will work with common suppliers to improve their green practices and set emissions reduction targets, enhancing their sustainability efforts.
In terms of forward non-GAAP P/E, AMKR is trading at 20.53x, 11.6% lower than the industry average of 23.23x. Likewise, the stock’s forward EV/Sales and Price/Cash Flow multiples of 1.20 and 6.47 are 58.5% and 66.2% lower than the industry averages of 2.88x and 19.15x, respectively.
For the second quarter of 2024, which ended on June 30, AMKR's net sales increased marginally year-over-year to $1.46 billion, while its operating income margin improved by 40 basis points to 5.6%. Its operating income stood at $82 million, up 7.9% year-over-year, while its attributable net income amounted to $67 million, representing an increase of 4.7% from the last year. Also, the company’s adjusted EPS for the quarter increased 3.8% year-over-year to $0.27.
For the third quarter of 2024, AMKR anticipates net sales to range from $1.79 billion to $1.89 billion, with a gross margin of 14%-16%. Net income is projected to be between $105 million and $140 million, or $0.42 to $0.56 per diluted share.
Analysts expect AMKR’s revenue for the fiscal fourth quarter (ending December 2024) to grow 5.1% year-over-year to $1.84 billion, while its EPS for the same quarter is expected to increase 12.6% year-over-year to $0.54. Moreover, the company has topped the EPS estimates in each of the trailing four quarters, which is promising.
Over the past year, the stock has gained 28.8%, closing the last trading session at $32.40.
It’s no surprise that AMKR has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Value and Momentum. Out of 90 stocks in the Semiconductor & Wireless Chip industry, AMKR is ranked #14.
Beyond what is stated above, we’ve also rated AMKR for Growth, Stability, Sentiment, and Quality. Get all AMKR ratings here.
BorgWarner Inc. (BWA)
BWA provides technology solutions for combustion, hybrid, and electric vehicles worldwide. The company’s products help improve vehicle performance, propulsion efficiency, stability, and air quality. It operates in three segments: Air Management; Drivetrain & Battery Systems; and ePropulsion.
On July 31, BWA secured multiple contracts to supply its electric cross differential (eXD) technology to three major OEMS, including GAC motor, an East Asian automaker, and a prominent global OEM in Europe. The eXD will be integrated into various BEV models, from sports cars to premium sedans, enhancing vehicle efficiency and communication.
On the same day, BWA announced a contract to deliver its high-voltage eFan system for a major global OEM’s heavy- and medium-duty BEV series in North America. The management believes that the efficient eFan system has the scalability to meet specific customer requirements, with a wide voltage range and liquid cooling for long-term reliability.
In terms of forward EV/Sales, BWA is trading at 0.71x, which is 41.1% lower than the industry average of 1.20x. The stock’s forward Price/Cash Flow ratio of 4.93x is 48.8% below the industry average of 9.63x. Also, its forward EV/EBITDA multiple of 5.25 compares to the industry average of 9.78x.
In the fiscal second quarter that ended on June 30, 2024, BWA’s net sales amounted to $3.60 billion, while its gross profit increased marginally year-over-year to $685 million. Net earnings attributable to BWA came in at $303 million, up 48.5% year-over-year. The company’s adjusted EPS grew 12.3% from the prior-year quarter to $1.19. In addition, its free cash flow stood at $297 million, compared to the year-ago value of $30 million.
As per the updated full-year 2024 guidance, the company projects adjusted net earnings between $3.95 and $4.15. Organic sales are forecasted to grow by 0.5% to 2.5%. In addition, operating cash flow is anticipated to range from $1.325 billion to $1.375 billion, with free cash flow between $475 million and $575 million.
The consensus revenue estimate of $3.58 billion for the fiscal fourth quarter (ending December 2024) represents a 1.6% increase year-over-year. The consensus EPS estimate of $0.95 for the ongoing quarter indicates a 6.1% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
BWA shares have surged 7.8% over the past six months to close the last trading session at $32.51.
BWA’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Quality. Within the A-rated Auto Parts industry, BWA is ranked #14 out of 61 stocks. Click here to access the additional ratings for BWA (Momentum, Stability, and Sentiment).
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LYB shares were trading at $96.83 per share on Wednesday afternoon, up $0.27 (+0.28%). Year-to-date, LYB has gained 4.53%, versus a 18.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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