The rising demand for safer, more convenient vehicles, alongside increased emphasis on comfort, is propelling the auto industry. So, robust auto stocks Honda Motor Co., Ltd. (HMC), AB Volvo (publ) (VLVLY), Copart, Inc. (CPRT), Autoliv, Inc. (ALV), Mazda Motor Corporation (MZDAY), Cars.com Inc. (CARS) and Ituran Location and Control Ltd. (ITRN) could be solid buys.
Last month, new vehicle sales rose 2.2% year-over-year in the US, amounting to 1,082,620 units. This uptick in sales signals a positive trend in the automotive sector, indicating heightened consumer confidence and demand.
Moreover, the introduction of advanced infotainment systems and their widespread adoption, as well as the implementation of central controllers and telematics, is expected to fuel market expansion further.
Additionally, the adoption of 3D printing technology, as well as the increased demand for hybrid and all-electric vehicles, are also driving market expansion. The global automotive motors market will reach $42.86 billion by 2032, expanding at a CAGR of 4.4%.
Further, the increasing demand for electric vehicles, driven by environmental concerns such as pollution reduction and the depletion of fossil fuels, is also expected to bolster market growth. This shift towards electric vehicles will also stimulate demand for automotive motors in the years ahead.
Besides, AI is transforming the automotive sector, enhancing safety, efficiency, and driving pleasure. Generative AI fosters innovation, enabling designers to craft sleeker, fuel-efficient vehicles, streamline manufacturing, and enhance driving aids like autonomous capabilities, resulting in heightened productivity and reduced costs.
On top of it, the global auto parts market is developing as a result of technical improvements such as high-performance brake systems and electronic stability control systems. The global auto parts market is anticipated to grow at a 6.8% CAGR until 2030.
Given the industry tailwinds, it's time to examine the fundamentals of the top seven stocks to watch in the auto industry.
Honda Motor Co., Ltd. (HMC)
Based in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power, and other products globally.
HMC’s sales revenue during the nine months ended December 31, 2023, increased 19.8% year-over-year to ¥15 trillion ($100.52 billion). Its operating profit increased 46.7% year-over-year to ¥1.08 trillion ($7.24 billion). The company’s profit for the period increased 45.9% over the prior year period to ¥924.69 billion ($6.20 billion).
For fiscal 2024, HMC’s revenue and EPS are expected to increase 410.7% and 49.3% year-over-year to $136.11 billion and $4.26, respectively.
Over the past year, the stock has gained 37.2% to close the last trading session at $34.48.
HMC’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Stability and a B for Growth, Value, and Quality. Within the 52-stock Auto & Vehicle Manufacturers industry, it is ranked #5.
To see HMC’s additional ratings for Sentiment and Momentum, click here.
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.
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 ($14.20 billion) 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.
Analysts expect VLVLY’s revenue to come in at $12.06 billion for the fiscal first quarter ending March 2024.
The stock has gained 33.7% over the past year to close the last trading session at $25.22.
VLVLY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
VLVLY has an A grade for Stability and a B for Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #11.
To see additional POWR Ratings for Growth, Value, Momentum and Sentiment for VLVLY, click here.
Copart, Inc. (CPRT)
CPRT provides online vehicle auctions and remarketing services globally, connecting various stakeholders, including insurers, banks, dealers, and the public.
In the fiscal first quarter that ended October 31, 2023, CPRT’s total service revenues and vehicle sales increased 14.2% over the year-ago quarter to $1.02 billion. Its gross profit increased 25.6% year-over-year to $464.02 million. The company’s net income and EPS came in at $332.53 million and $0.34 per common share, representing an increase of 35.3% and 36% year-over-year, respectively.
Street expects CPRT’s EPS and revenue for the fiscal year ending July 2024, to increase 16% and 9.6% year-over-year to $1.46 and $4.24 billion, respectively. The company has an impressive surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 48.7% over the past year to close the last trading session at $50.48.
It’s no surprise that CPRT has an overall rating of B, which translates to a Buy in our POWR Ratings system.
CPRT has an A grade for Quality and a B in Stability and Sentiment. Within the Auto Dealers & Rentals industry, it is ranked #4 out of 20 stocks.
Beyond the POWR Ratings stated above, we have also rated CPRT for Growth, Value, and Momentum. Get all CPRT ratings here.
Autoliv, Inc. (ALV)
Headquartered in Stockholm, Sweden, ALV through its subsidiaries, develops, manufactures, and supplies passive safety systems to the automotive industry in Europe, the Americas, China, Japan, and rest of Asia.
During its fiscal fourth quarter, which ended September 31, ALV’s net sales increased 18% year-over-year to $2.75 billion. Its adjusted operating income grew 43% from its year-ago value to $334 million. The company’s adjusted EPS increased 105% year-over-year to $3.74.
ALV’s EPS and revenue are expected to grow 18.8% and 5.4% year-over-year to $9.73 and $11.04 billion in the fiscal year 2024. The company has exceeded the consensus EPS estimates in three of the trailing four quarters.
ALV’s shares have gained 21.1% over the past year to close the last trading session at $110.94.
ALV’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has a B grade for Growth and Quality. It is ranked #16 out of 62 stocks in the A-rated Auto Parts industry.
To see additional ALV ratings for Value, Stability, Sentiment, and Momentum, click here.
Mazda Motor Corporation (MZDAY)
Headquartered in Hiroshima, Japan, MZDAY manufactures and sells passenger cars and commercial vehicles in Japan, China, North America, Europe, and internationally.
In the fiscal third quarter that ended December 31, 2023, MZDAY’s net sales increased 32.3% year-over-year to ¥3.57 trillion ($23.92 billion). Its operating income increased 82.9% over the prior-year period to ¥200.20 billion (1.34 billion). The company’s net income attributable to owners of the parent increased 59.8% year-over-year to ¥165.49 billion ($1.11 billion).
The consensus revenue estimate of $8.85 billion for the fiscal fourth quarter ending March 2024 represents a 6.2% increase year-over-year.
Over the past year, the stock has gained 59.6% to close the last trading session at $6.24.
MZDAY’s rosy outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Growth, Stability, and Quality. It is ranked first in the Auto & Vehicle Manufacturer industry.
In addition to the POWR Ratings stated above, one can access MZDAY’s Growth, Momentum, and Sentiment ratings here.
Cars.com Inc. (CARS)
CARS operates as a digital marketplace connecting car shoppers with sellers, providing tools for financing and digital solutions. Serving 19,506 dealers nationwide, it offers advertising and media services to the automotive industry.
During the third quarter, which ended September 30, 2023, CARS’ total revenue amounted to $174.33 million, up 5.9% from the prior-year quarter. The company’s net income and EPS amounted to $4.49 million and $0.07, compared to its previous-year quarter’s net loss and loss per share of $2.94 million and $0.04, respectively. It reported an adjusted EBITDA of $49.49 million.
Analysts expect CARS’ revenue and EPS to grow 5.2% and 89.2% year-over-year to $687.95 million and $2.80, respectively, for the fiscal year 2023. The company surpassed the revenue estimates in three of the trailing four quarters.
The stock has gained 14.1% over the past year to close the last trading session at $19.39.
CARS’ optimistic outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Sentiment. Within the Auto Dealers & Rentals industry, it is ranked first.
To see CARS’ additional POWR Ratings for Growth, Momentum, and Quality, click here.
Ituran Location and Control Ltd. (ITRN)
Headquartered in Azor, Israel, ITRN provides location-based telematics services and machine-to-machine telematics products. It has two segments: Telematics Services and Telematics Products.
ITRN’s revenues for the third quarter ended September 30, 2023, increased 11.5% year-over-year to $81.05 million. Its gross profit rose 13.9% over the prior-year quarter to $39.41 million. Its net income attributable to the company rose 24.3% year-over-year to $12.51 million.
Street expects ITRN’s EPS to increase 31.8% year-over-year to $2.40 for the year ending December 2023. It has topped EPS estimates in three of four trailing quarters.
The stock has gained 24.3% over the past nine months to close the last trading session at $26.42.
It’s no surprise that ITRN has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has an A grade for Stability and Quality and a B for Value and Sentiment. It is ranked first in the Auto Parts industry.
Beyond what is stated above, we’ve also rated TRN for Growth and Momentum. Get all ITRN ratings here.
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HMC shares were trading at $34.19 per share on Tuesday afternoon, down $0.29 (-0.84%). Year-to-date, HMC has gained 10.61%, versus a 4.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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