The U.S. automotive sector regained stability in 2023 following a tumultuous period since the onset of the pandemic. The industry stands to benefit from expected lower interest rates, decreased inflation, and improved inventory, potentially sustaining momentum in 2024. Moreover, the consistent shift toward electric vehicles (EVs) and rapid tech integration should drive the industry's long-term prospects.
However, not all auto stocks are well-positioned to capitalize on the favorable industry trends. I think waiting for a better entry point in Ford Motor Company (F) is prudent. However, Lucid Group, Inc. (LCID) is best avoided for now.
Before delving deeper into the fundamentals of these stocks to understand why they may not be the right picks now, let’s discuss what’s shaping the industry’s prospects.
2023 was the industry’s best year since the pandemic, with new vehicle sales hitting approximately 15.5 million units. EVs, including hybrids, comprised nearly 17%.
In 2024, the automotive sector expects global challenges, such as the energy crisis, slower global demand, and supply-chain issues. Despite these hurdles, projections suggest that global new-vehicle sales will stay flat, with an uptick in new-car sales.
Additionally, the worldwide automotive market is projected to reach $6.07 trillion by 2030, growing at a 6.9% CAGR. This growth is expected to be driven by factors such as increasing customer interest in electric vehicles and advancements in autonomous driving technology.
Considering these trends, let’s take a look at the fundamentals of the featured stocks from the Auto & Vehicle Manufacturers industry, starting with the one ranked lower from the investment point of view.
Stock #2: Lucid Group, Inc. (LCID)
LCID is a technology and automotive company that engages in the electric vehicle technologies business. The company designs, engineers, and builds electric vehicles, EV powertrains, and battery systems.
LCID’s 0.09x trailing-12-month asset turnover ratio is 91.2% lower than the 0.99x industry average.
LCID’s revenues for the third quarter that ended September 30, 2023, decreased 29.5% year-over-year to $137.81 million. Its loss from operations widened 9.5% year-over-year to $752.88 million. The company’s net loss came in at $630.89 million, up 5.9% year-over-year. In addition, its loss per share was $0.28.
Analysts expect LCID’s revenue for the quarter ended December 31, 2023, to decrease 26.2% year-over-year to $190.22 million, while its EPS for the same quarter is expected to remain negative. Over the past nine months, LCID’s stock has declined 53% to close the last trading session at $3.62.
LCID’s POWR Ratings reflect its bleak outlook. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Value, Stability, and Quality and a D for Growth and Sentiment. It is ranked last out of 52 stocks in the Auto & Vehicle Manufacturers industry. Beyond what we stated above, we also have given LCID grades for Momentum. Get all LCID ratings here.
Stock #1: Ford Motor Company (F)
F develops, delivers, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide. It operates through Ford Blue, Ford Model E, Ford Pro, Ford Next, and Ford Credit segments.
On October 25, 2023, F announced a tentative labor contract agreement with the UAW, covering the U.S. operations. This agreement aims to restart several manufacturing plants and call back 20,000 employees. It is now subject to ratification by F's UAW-represented employees.
In terms of the trailing-12-month Capex/Sales, F’s 4.60% is 51.3% higher than the 3.04% industry average. Its 14.27% trailing-12-month Return on Common Equity is 25.1% higher than the 11.40% industry average. However, the stock’s 10.4% trailing-12-month gross profit margin is 70.6% lower than the 35.38% industry average.
F’s total revenues for the third quarter (ended September 30, 2023) increased 11.2% year-over-year to $43.80 billion. Its adjusted net income increased 27.4% year-over-year to $1.34 billion. Its adjusted EBIT rose 21.9% year-over-year to $2.20 billion. The company’s adjusted EPS came in at $0.39, representing an increase of 30% year-over-year.
On the other hand, its total liabilities equity came in at $268.07 billion, up 47.6% year-over-year to $2.46 billion as of September 30, 2023.
Street expects F’s EPS and revenue for the quarter ending December 31, 2023, to decrease 72% and 0.1% year-over-year to $0.14 and $41.80 billion, respectively. Over the past month, the stock has gained 7.5% to close the last trading session at $11.84.
F’s POWR Ratings reflect uncertainty. It has an overall rating of C, which translates to a Neutral in our proprietary rating system.
It has a C grade for Growth, Momentum, and Quality. It is ranked #34 in the same industry. To see F’s ratings for Value, Stability, and Sentiment, click here.
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F shares rose $0.01 (+0.08%) in premarket trading Wednesday. Year-to-date, F has declined -2.79%, versus a -0.29% 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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