The auto industry is fueled by rising demand for personal and commercial vehicles, the rise of new technologies like electric and self-driving cars, and the growing awareness of safety and environmental issues among consumers. Given the industry’s steady growth prospects, investors could consider quality stocks Isuzu Motors Limited (ISUZY), AB Volvo (publ) (VLVLY), and Subaru Corporation (FUJHY) that are bursting with opportunities.
The global automotive market is expected to grow to $28.70 billion by 2030, at a CAGR of 4.5%.
A surge in the production of hybrid vehicle parts, growth of 3D printing, growing demand for autonomous vehicle parts, and favorable government initiatives supporting sustainable auto parts manufacturing are the major trends impacting the global auto parts manufacturing market.
The global auto parts manufacturing market is projected to grow at a CAGR of 6.1% until 2032.
According to BloombergNEF’s electric vehicle outlook, light commercial EV sales are set to rise rapidly due to attractive economics, more models available, growing fleet commitments and policies, reaching almost 70% of global sales by 2040. Two- and three-wheeled vehicle sales also continue to rise in emerging economies and are set to be almost all electric globally by 2040.
With these favorable trends in mind, let's delve into the fundamentals of the three best Auto & Vehicle Manufacturers stocks, starting with the third choice.
Stock #3: Isuzu Motors Limited (ISUZY)
Based in Japan, ISUZY manufactures and sells commercial vehicles, light commercial vehicles, and diesel engines and components worldwide. Its products include heavy and medium duty trucks and buses, and light-duty trucks; passenger pickup vehicles, pickup trucks, and SUVs; and marine and industrial engines.
On December 22, 2023, ISUZY announced that in partnership with Honda Motor Co., they have begun public road testing in Japan for their jointly developed GIGA FUEL CELL, a hydrogen fuel-powered heavy-duty truck, with plans to launch the production model in 2027. This initiative reinforces ISUZY’s commitment to advancing eco-friendly heavy-duty transportation solutions.
ISUZY’s trailing-12-month EBIT of 8.52% is 11.7% higher than the industry average of 7.63%, while its trailing-12-month ROTA of 5.24% is 30.4% higher than the industry average of 4.01%.
ISUZY’s net sales for the second quarter that ended September 30, 2023, increased 9.7% year-over-year to ¥1.64 trillion ($11.12 billion). Its gross profit increased 17.8% year-over-year to ¥327.93 billion ($2.22 billion). Its comprehensive income attributable to the owners of the parent increased 32% over the prior year quarter to ¥178.59 billion ($1.21 billion). Additionally, its operating income increased 27.6% year-over-year to ¥143.20 billion ($970.92 million). Also, its profit attributable to owners of the parent increased 20.7% year-over-year to ¥88.11 billion ($597.40 million).
Street expects ISUZY’s revenue for the fiscal year ending March 31, 2024, to increase 142.3% year-over-year to $23.33 billion.
Over the past three months, the stock has gained 23.3% to close the last trading session at $13.58.
ISUZY’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. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Value, and Quality. It is ranked #10 out of 52 stocks in the Auto & Vehicle Manufacturers industry.
Click here to see the other ratings of Growth, Sentiment and Momentum.
Stock #2: AB Volvo (publ) (VLVLY)
Based in Gothenburg, Sweden, VLVLY is a global manufacturer of trucks, buses, construction equipment, and engines, offering a diverse range of products under brands like Volvo, Renault Trucks, and Mack. The company also provides services such as financing and maintenance and has strategic partnerships for autonomous trucks and battery development.
On January 29, 2024, VLVLY had unveiled an all-new heavy-duty truck platform for the North American market in parallel to a new heavy-duty truck range for Europe, Australia and markets in Asia and Africa. New energy efficient models – including trucks running on electricity and renewable fuels will reduce CO2 emissions and take the company closer to the target of having a net-zero emission product range by year 2040.
VLVLY’s trailing-12-month EBIT margin of 12.55% is 29.1% higher than the industry average of 9.72%. Its 4.23% trailing-12-month CAPEX/Sales is 42.4% higher than the 2.97% industry average.
In the fiscal fourth quarter, which ended December 31, 2023, VLVLY’s net sales and gross income grew 10.3% and 24.5% year-over-year to SEK148.12 billion ($14.21 million) and SEK38.71 billion ($3.71 billion). The company reported an adjusted operating income of SEK18.38 billion ($1.76 billion), up 51% from the prior-year quarter. Moreover, its EPS increased 81.9% from the previous year’s quarter to SEK5.93.
The consensus revenue for the fiscal year ending December 2024 is $47.82 billion. Its EPS is expected to be $2.05 for the same year. Also, the company topped the consensus revenue estimates in three of the four trailing quarters, which is impressive.
VLVLY’s shares have gained 21.6% over the past three months to close the last trading session at $23.94.
VLVLY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Stability and a B in Quality. Within the same industry, it is ranked #7.
Beyond what is stated above, we’ve also rated VLVLY for Momentum, Value, Growth and Sentiment. Get all VLVLY ratings here.
Stock #1: Subaru Corporation (FUJHY)
Based in Japan, FUJHY manufactures and sells automobiles and aerospace products in Japan, rest of Asia, North America, Europe, and internationally. It operates through three segments: Automotive; Aerospace; and Others.
On January 15, 2024, FUJHY announced that it had expanded its Subaru Loves to Help initiative through a new partnership with Operation Warm, a national nonprofit that provides brand-new, high-quality coats and shoes for children in urgent need.
FUJHY’s trailing-12-month ROTC and ROTA of 8.62% and 6.26% are 41.5% and 56% higher than the industry averages of 6.09% and 4.01%, respectively.
FUJHY’s revenues came in at ¥2.21 trillion ($14.98 billion) for the second quarter ended September 30, 2023, up 26.4% year-over-year. Its operating income increased 68.3% year-over-year to ¥185.80 billion ($1.26 billion). In addition, its profit increased 93.9% year-over-year to ¥77.90 billion ($528.18 million).
Analysts expect FUJHY’s revenue for the fiscal third quarter ended December 2023 to increase 1.5% year-over-year to $8.16 billion. Also, the company topped the consensus EPS estimates in each of the four trailing quarters.
The stock gained 23.8% over the past year to close the last trading session at $9.98.
It’s no surprise that FUJHY has an overall rating of B, which equates to Buy in our proprietary rating system.
FUJHY has an A grade for Value and a B in Stability and Quality. Within the same industry, it is ranked #6.
In addition to the POWR Ratings we’ve stated above, we also have FUJHY’s ratings for Momentum, Growth, and Sentiment. Get all FUJHY ratings here.
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ISUZY shares were unchanged in premarket trading Wednesday. Year-to-date, ISUZY has gained 9.96%, versus a 3.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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