Despite macroeconomic concerns, auto sales in the US are expected to remain robust due to increased demand. So, quality auto stocks Continental Aktiengesellschaft (CTTAY), Allison Transmission Holdings, Inc. (ALSN), and Garrett Motion Inc. (GTX) could be wise additions to your portfolio.
According to GlobalData, US Light Vehicle sales totaled 1.30 million units in July. The annualized selling rate increased marginally in July, rising from 15.7 million units per year in June to 15.8 million units per year in July.
Also, in the second quarter, 300,000 new electric vehicles were sold in the United States, a record for any quarter and an increase of 48.4% from a year ago.
Moreover, the auto parts market is estimated to grow at a CAGR of 3.6% until 2027. The market expansion is driven by factors including technological advancement, digitalization of automotive repair and maintenance services, and strong aftermarket demand.
Furthermore, the global automotive market is expected to grow to $28.70 billion by 2030 at a CAGR of 4.5%.
Take a detailed look at the stocks mentioned above:
Continental Aktiengesellschaft (CTTAY)
Headquartered in Hanover, Germany, CTTAY is a technology company that offers mobility solutions to the automotive sector globally. It operates through four sectors: Automotive; Tires; ContiTech; and Contract Manufacturing.
CTTAY’s forward EV/Sales multiple of 0.47 is 60.6% lower than the industry average of 1.20. Its forward Price/Sales multiple of 0.34 is 61.8% lower than the industry average of 0.88.
CTTAY’s trailing-12-month CAPEX/Sales of 5.42% is 68.6% higher than the industry average of 3.22%. Its trailing-12-month asset turnover ratio of 1.07x is 7.1% higher than the industry average of 1x.
CTTAY’s sales increased 11.1% year-over-year to €10.31 billion ($11.05 billion) in the first quarter that ended March 31, 2023. Its adjusted EBIT grew 35% from the year-ago value to €578.30 million ($619.83 million), while its net income increased 58.1% year-over-year to €392.60 million ($420.79 million). The company’s EPS rose 59.2% from its year-ago value to €1.91.
The consensus revenue estimate of $46.85 billion for the year ending December 2023 represents a 12.7% increase year-over-year. Its EPS is expected to grow significantly year-over-year to $0.76 for the same period. CTTAY’s shares have gained 35.4% over the past nine months to close the last trading session at $7.65.
CTTAY’s POWR Ratings reflect promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CTTAY has a B grade for Growth, Value, Stability and Quality. It is ranked #8 out of 60 stocks in the A-rated Auto Parts industry. Click here for the additional POWR Ratings for Momentum, and Sentiment for CTTAY.
Allison Transmission Holdings, Inc. (ALSN)
ALSN designs, manufactures, and sells commercial and defense fully automatic transmissions for medium-and heavy-duty commercial vehicles, and medium-and heavy-tactical U.S. defense vehicles worldwide.
On July 26, 2023, ALSN will provide the Allison eGen ForceTM electric hybrid system for American Rheinmetall Vehicles' (ARV) Team Lynx prototype. Team Lynx, led by ARV, was recently selected for Phases 3 and 4 of the U.S. Army's Optionally Manned Fighting Vehicle competition, currently known as the XM30 Combat Vehicle program.
Dana Pittard, Vice President Defense Programs, Allison Transmission, said, “Allison Transmission is proud to partner with ARV and all members of Team Lynx—Textron Systems, Raytheon, L3Harris Technologies and Anduril Industries.”
ALSN’s forward EV/EBIT multiple of 8.23 is 46.9% lower than the industry average of 15.48. Its forward EV/EBITDA multiple of 6.89 is 39.1% lower than the industry average of 11.30.
ALSN’s trailing-12-month ROCE of 69.25% is 401.5% higher than the industry average of 13.81%. Its trailing-12-month net income margin of 21.17% is 239.6% higher than the industry average of 6.23%.
For the fiscal second quarter that ended June 30, 2023, ALSN’s net sales increased 17.9% year-over-year to $783 million. Its adjusted EBITDA grew 26.9% from the year-ago value to $288 million. Furthermore, the company’s net income rose 43.4% from the prior year’s period to $175 million, while EPS came in at $1.92, up 52.4% year-over-year.
Analysts expect ALSN’s revenue to increase 9.2% year-over-year to $3.02 billion for the year ending December 2023. Its EPS is expected to grow 24.6% year-over-year to $6.89 for the same period. It surpassed EPS estimates in all four trailing quarters. The stock has gained 55.6% over the past year to close the last trading session at $59.02.
It’s no surprise that ALSN has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Quality and a B grade for Sentiment. It is ranked #9 in the same industry.
Beyond what is stated above, we’ve also rated ALSN for Growth, Value, Momentum and Stability. Get all ALSN ratings here.
Garrett Motion Inc. (GTX)
GTX designs, manufactures, and sells turbochargers and electric-boosting technologies for light and commercial vehicle OEMs globally. The company provides light-vehicle gasoline, light-vehicle diesel, and commercial vehicle turbochargers; and automotive software solutions.
GTX’s forward EV/Sales of 0.84x is 30% lower than the industry average of 1.20x. Its forward EV/EBIT of 6.31x is 55% lower than the industry average of 14.02x.
GTX’s trailing-12-month ROTC of 30.26% is 408.3% higher than the industry average of 5.95%, while its trailing-12-month ROTA of 12.76x is 250% higher than the industry average of 3.65x.
In the fiscal second quarter ended June 30, 2023, GTX’s net sales increased 17.7% year-over-year to $1.01 billion. The company’s adjusted EBITDA increased 23.2% year-over-year to $170 million. Also, its gross profit increased 19.5% year-over-year to $202 million.
Street expects GTX’s revenue to increase 11.7% year-over-year to $4.02 billion for the year ending December 2023. Its EPS is expected to grow at 32.3% year-over-year to $0.99 for the same period. Over the past year the stock has gained 13.8% to close the last trading session at $7.60.
GTX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #4 in the same industry. It has a B grade for Growth, Value, Stability and Quality. To see additional GTX ratings for Sentiment and Momentum, click here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
CTTAY shares were trading at $7.57 per share on Wednesday morning, down $0.09 (-1.11%). Year-to-date, CTTAY has gained 28.89%, versus a 17.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
Investor Interest Soars in the Top 3 Auto Stocks StockNews.com
