3 Auto Stocks to Buy to Defend Your Portfolio With robust demand for new vehicles, a growing transition to EVs globally, and the integration of advanced technology, the auto industry is well-poised for significant growth and expansion. Given the...
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With robust demand for new vehicles, a growing transition to EVs globally, and the integration of advanced technology, the auto industry is well-poised for significant growth and expansion. Given the industry tailwinds, it could be wise to invest in fundamentally sound auto stocks Genuine Parts (GPC), Nissan (NSANY), and Miller Industries (MLR) for a resilient portfolio. Keep reading….
Given sustained demand for new and used automobiles, the widespread adoption of Electric Vehicles (EVs), and increased technology integration, the auto industry's long-term outlook appears promising. Hence, quality auto stocks Genuine Parts Company (GPC), Nissan Motor Co., Ltd. (NSANY), and Miller Industries, Inc. (MLR) could be ideal additions to your portfolio.
The U.S. auto industry continued to ride the recovery wave in the third quarter of 2023 on pent-up demand and improving inventory levels. According to a forecast released by Cox Automotive, new vehicle sales in the third quarter are expected to exceed 3.9 million, up more than 15% from the same period last year.
"As the first three quarters of 2023 come to a close, "pleasantly surprised' may be the sentiment of many auto analysts," said Cox Automotive Senior Economist Charlie Chesbrough.
"The market has faced high interest rates, real affordability issues, and ongoing inflation, which could have led to large declines in vehicle sales. However, pent-up demand has been fueling the vehicle market this year. Consumers, and even more so large fleets, have become buyers as inventory improves. Year-over-year sales gains have been surprising indeed," Chesbrough added.
In addition, the growing demand for electric and hybrid automobiles worldwide would propel the industry's growth. As per a report by Fortune Business Insights, the global EV market is expected to reach $1.58 trillion by 2030, growing at a CAGR of 17.8% during the forecast period.
According to Statista, revenue in the U.S. electric vehicles market is projected to reach $161.60 billion by 2028, exhibiting a CAGR of 18.2% from 2023 to 2028.
Further, the global auto parts market is projected to reach $755 billion by 2026, growing at a CAGR of 7.5%. The rising demand for new and used vehicles, the continued growth in aftermarket sales, the growing adoption of EVs worldwide, and the extensive integration of advanced technology are key factors bolstering the auto parts industry's expansion.
Considering the industry's bright prospects, investing in fundamentally strong auto stocks GPC, NSANY, and MLR could be wise.
Let's discuss the fundamentals of these stocks in detail:
Genuine Parts Company (GPC)
GPC distributes and sells automotive replacement parts, and industrial parts and related materials. The company operates through two segments: Automotive Parts Group and Industrial Parts Group.
On August 1, GPC announced an acquisition of its European Automotive business, expanding its leadership position in Spain. Effective July 31, London, United Kingdom-based Alliance Automotive Group (AAG) acquired Recambios y Accesorios Gaudi, S.L.
"We are pleased to expand our European Automotive footprint with the addition of Gaudi," said GPC's Chairman and CEO Paul Donahue. "With this acquisition, we are broadening our leadership position in Spain, Europe's fifth largest automotive market, while extending the opportunities for rollout of the NAPA brand and enhancing the profitability of our European business."
GPC's net sales increased 2.6% year-over-year to $5.82 billion in the third quarter ended September 30, 2023. Its gross profit grew 6.5% from the year-ago value to $2.11 billion. Its adjusted net income rose 10.7% from the prior year's quarter to $351.20 million, and its adjusted EPS came in at $2.49, an increase of 11.7% year-over-year.
The company updated its full-year 2023 guidance previously provided in its earnings release on July 20, 2023. GPC reaffirmed revenue growth of 4% to 6%, and it expects cash from operations in the range of $1.30 billion to $1.40 billion. The company updated EPS to $9.20 to $9.30, compared to the previous guidance of $9.15 to $9.30.
Analysts expect GPC's revenue and EPS for the fiscal year (ending December 2023) to increase 4.9% and 11.2% year-over-year to $23.19 billion and $9.27, respectively. Also, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
For the fiscal year 2024, the company's revenue and EPS are estimated to grow 4.1% and 6.7% from the prior year to $24.13 billion and $9.89, respectively.
The stock has gained 6.9% over the past month to close the last trading session at $137.47.
GPC's robust outlook is reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has a B grade for Quality. Within the A-rated Auto Parts industry, GPC is ranked #14 of 61 stocks.
Click here to access additional ratings of GPC for Growth, Value, Momentum, Stability, and Sentiment.
Nissan Motor Co., Ltd. (NSANY)
NSANY, headquartered in Yokohama, Japan, manufactures and sells vehicles and automotive parts globally. The company markets and sells its vehicles under the Nissan and Infiniti brands. In addition, it offers financial services, card business, auto credit and car leasing, insurance agency, and inventory finance.
On November 7, Nissan celebrated its 23rd anniversary in Brazil while preparing to begin a new chapter in the company's history in Brazil and South America, aligned with its global Ambition 2030 plan.
During the ceremony held at its Resende Industrial Complex, NSANY announced its 2023-25 investment plan expansion, reaching R$2.8 billion ($573.52 million) and confirmed the production of two new SUVs (Sports Utility Vehicles) and a turbo engine. Nissan's new investment strengthens the company's strategy in the local market and across South America.
For the first half that ended September 30, 2023, NSANY's net sales grew 30.1% year-over-year to ¥6.06 trillion ($40.76 billion). The company's operating income increased 115% from the year-ago value to ¥336.74 billion ($2.26 billion). Its net income attributable to owners of parent rose 359.4% from the prior year's quarter to ¥296.21 billion ($1.99 billion).
Furthermore, the company's earnings per share for the six months came in at ¥75.64, an increase of 359.3% year-over-year.
Nissan revised upward its fiscal 2023 full-year forecast, reflecting expectations of further improvements in global retail sales (excluding China) and favorable foreign exchange benefits during the first half of 2023. The revised forecast suggests a ¥400 billion ($2.69 billion) upward adjustment in net revenue and a ¥70 billion ($470.83 million) increase in operating profit.
In addition, NSANY's net profit is anticipated to grow by ¥50 billion ($336.31 million) to ¥390 billion ($2.62 billion) for the full year.
Analysts expect NSANY's revenue for the fiscal year (ending March 2024) to increase 283.6% year-over-year to $86.16 billion. The company's EPS for the current year is expected to grow 87.2% from the prior year to $1.58. Moreover, it has topped the consensus revenue estimates in each of the trailing four quarters.
Over the past six months, NSANY's stock has gained 7.2% and 25.6% year-to-date to close the last trading session at $7.89.
NSANY's POWR Ratings reflect bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
NSANY has an A grade for Growth. The stock has a B grade for Value and Stability. It is ranked #19 among 52 stocks within the B-rated Auto & Vehicle Manufacturers industry.
To see the other ratings of NSANY for Momentum, Sentiment, and Quality, click here.
Miller Industries, Inc. (MLR)
MLR manufactures and sells towing and recovery equipment. The company provides wreckers used to recover and tow disabled vehicles and other equipment and car carriers. It markets its products under the Century, Challenger, Vulcan, Holmes, Champion, Titan, Chevron, Jige, and Boniface brands.
On May 31, MLR announced the acquisition of Southern Hydraulic Cylinder, Inc., a custom hydraulic cylinder manufacturer. This strategic acquisition will help boost the company's efforts to improve the stability of its supply chain and is anticipated to be accretive within the first year.
During the third quarter that ended on September 30, 2023, MLR's sales increased 33.6% year-over-year to $274.57 million, while its gross profit grew 84.9% from the year-ago value to $42.87 million. The company's income before income taxes was $22.03, compared to $6.80 million in the prior year's quarter.
Additionally, the company's net income was $17.46 million, or $1.52 per common share, compared to $5.23 million, or $1.52 per common share a year earlier, respectively.
Shares of MLR have surged 41.2% over the past nine months and 47.4% over the past year to close the last trading session at $39.76.
MLR's sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MLR has an A grade for Growth and a B grade for Sentiment. It is ranked #11 out of 61 stocks in the A-rated Auto Parts industry.
In addition to the POWR Ratings we've stated above, we also have MLR ratings for Value, Momentum, Stability, and Quality. Get all MLR ratings here.
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GPC shares were unchanged in premarket trading Wednesday. Year-to-date, GPC has declined -19.31%, versus a 19.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
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