The prospects of the automotive market appear robust with the ever-growing consumer demand for new vehicles, especially high-end passenger cars, amid rising urbanization and increasing disposable incomes. The industry’s expansion is further boosted by the growing popularity of electric vehicles (EVs) globally and technological advancements.
Given the industry’s bright prospects, fundamentally sound auto stocks Oshkosh Corporation (OSK), AB Volvo (publ) (VLVLY), and REV Group, Inc. (REVG) could be ideal buys for solid returns this year.
According to a report by MarkLines, the U.S. new vehicle sales rose 15.5% in March to 1,455,030 units compared to February sales, a growth of 5.1% from 2023, representing a solid auto market. The passenger car sales were 293,894 units, holding a 20.2% market share. Further, the sales of EVs grew 3.3% during the first quarter.
The global automotive industry is projected to reach $6.86 trillion by 2033, expanding at a CAGR of 6.8%. Also, the electric vehicle market is significantly growing with solid demand for fuel-efficient, high-performance, and low-emission vehicles amid strict government rules & regulations. Lower EV battery costs and increasing fuel costs further back the market growth.
Moreover, the automotive AI market is growing widely with growing demand for autonomous vehicles, rising adoption of AI for traffic management, advanced automotive solutions, and government initiatives. The global automotive AI market is expected to expand at a CAGR of 22.7% by 2030.
Considering the encouraging market trends, let’s delve into the fundamentals of the top three Auto & Vehicle Manufacturers stocks, beginning with the third choice.
Stock #3: Oshkosh Corporation (OSK)
OSK offers purpose-built vehicles and equipment. It operates through Access; Defense; and Vocational segments. The company designs and manufactures aerial work platforms and telehandlers for construction, industrial, and maintenance applications and provides financing and leasing solutions.
On April 22, OSK’s Oshkosh Defense announced successful airdrop tests for Oshkosh FMTV A2 Cargo 6x6 Low-Velocity Airdrop (LVAD) by the U.S. Army Operational Test Command’s Airborne and Special Operations Test Directorate (ABNSOTD).
This marked a key milestone for the FMTV A2 LVAD program, where the tests validated the design and capabilities of the Cargo 6x6 LVAD, ensuring suitability for the stringent demands of airdrop and follow-on operations.
On February 29, OSK invested in Eatron® Technologies, a pioneering developer of AI-powered Battery Management Software (BMS). OSK’s investment supports Eatron's vision to use advanced analytics and predictive modeling for lithium-ion batteries to manage its wide range of electric vehicles.
The strategic investment aligns with OSK’s vision to collaborate with advanced technology companies and deliver best-in-class innovation to customers.
During the fourth quarter that ended December 31, 2023, OSK’s net sales increased 11.9% year-over-year to $2.47 billion. Its adjusted consolidated operating income rose 54.2% from the year-ago value to $239.90 million. The company’s adjusted net income and adjusted EPS came in at $169.40 million and $2.56, up 57.7% and 57% year-over-year, respectively.
In addition, the company’s total assets were $9.13 billion as of December 31, 2023, compared to total assets of $7.73 billion as of December 31, 2022.
According to the fiscal year 2024 outlook, OSK expects adjusted EPS to be $10.25, with a projected net sales of approximately $10.40 billion.
Analysts expect OSK’s revenue and EPS for the first quarter (ended March 2024) to increase 9.8% and 41.3% year-over-year to $2.49 billion and $2.25, respectively. Further, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, OSK’s stock has gained 36.1% and 53.2% over the past year to close the last trading session at $120.47.
OSK’s bright 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 Value. Within the Auto & Vehicle Manufacturers industry, OSK is ranked #20 out of 51 stocks.
Click here to access additional ratings of OSK (Growth, Sentiment, Quality Stability, and Momentum).
Stock #2: AB Volvo (publ) (VLVLY)
Headquartered in Gothenburg, Sweden, VLVLY manufactures and sells trucks, buses, construction equipment, and marine and industrial engines worldwide. It offers heavy-duty trucks for long-haulage and construction work and light-duty trucks under the Volvo, Renault Trucks, Mack, Eicher, and Dongfeng Trucks brands.
On April 11, VLVY announced building a new heavy-duty truck manufacturing plant in Mexico to expand the company’s U.S. production, providing additional capacity to support the growth plans of VLVLY and Mack Trucks in the U.S. and Canadian markets. The plant is expected to be functional in 2026.
On March 22, VLVLY and Renault Group launched the new company, Flexis SAS, for the next generation of fully electric and software-defined vehicles. Based in France, the company was formed to address the growing need for decarbonized and efficient urban logistics. VLVLY and Renault plan to invest €300 million ($320.33 million) respectively over the next three years.
For the first quarter that ended March 31, 2024, VLVLY reported net sales of SEK 131.18 billion ($12.08 billion). Its operating income grew 5.2% year-over-year to SEK 18.16 billion ($1.67 billion). The company’s income for the period and EPS came in at SEK 14.10 billion ($1.30 billion) and SEK 6.92, up 9% from the previous year’s quarter, respectively.
In addition, the company’s operating cash flow in industrial operations increased 77.8% year-over-year to SEK 8.90 billion ($819.47 million).
Analysts expect VLVLY’s revenue for the fiscal year (ending December 2025) to increase 5.4% year-over-year to $49.75 billion. The company's EPS is expected to grow 10.5% year-over-year to $2.37 for the same year. Furthermore, the company has topped the consensus revenue estimates in each of the trailing four quarters.
The stock has surged 37.9% over the past six months and 29.4% over the past year to close the last trading session at $26.07.
VLVLY’s POWR Ratings reflect its bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
VLVLY has a B grade for Quality and Stability. It is ranked #8 among 51 stocks within the Auto & Vehicle Manufacturers industry.
To see the other ratings of VLVLY for Sentiment, Growth, Value, and Momentum, click here.
Stock #1: REV Group, Inc. (REVG)
REVG designs, manufactures, and distributes specialty vehicles and related aftermarket parts and services internationally. It operates in three segments: Fire & Emergency; Commercial; and Recreation. It offers fire apparatus equipment under the Emergency One, Kovatch Mobile Equipment, Ferrara, Spartan Emergency Response, and Smeal brand names.
On January 26, REVG completed the sale of its school bus business, Collins Bus Corporation, to Forest River Bus, LLC for a purchase price of $303 million in cash. The strategic actions aim to optimize the company’s product portfolio and balance sheet. REVG rearranged its business segments to align with its future operations and open more opportunities.
On March 6, REVG’s Board of Directors declared a quarterly cash dividend of $0.05 per share of common stock, paid on April 12, 2024, to shareholders of record on March 28, 2024.
REVG pays an annual dividend of $0.20, which translates to a yield of 0.93% at the current share price. Its four-year average dividend yield is 2.35%. Moreover, the company’s dividend payouts have increased at a CAGR of 58.7% over the past three years.
During the first quarter that ended on January 31, 2024, REVG’s net sales increased marginally year-over-year to $586 million. Its gross profit grew 8.6% from the year-ago value to $62.90 million. The company’s adjusted net income was $14.70 million, or $0.25 per share, up 113% or 108.3% from the prior year’s quarter, respectively.
Furthermore, REVG’s adjusted EBITDA rose 43.2% year-over-year to $30.50 million. The company’s cash and cash equivalents stood at $87.90 million as of January 31, 2024, versus $21.30 million as of October 31, 2023.
As per the updated guidance for the fiscal year 2024, REVG expects net sales between $2.45 billion and $2.55 billion, and its adjusted net income is expected to be $72 million-$90 million. Also, the company’s adjusted EBITDA is projected between $145 million and $165 million, while adjusted free cash flow is anticipated to be $57 million-$72 million, respectively.
Street expects REVG’s EPS for the fiscal year (ending October 2025) to increase 39.8% year-over-year to $2.05, and its revenue is expected to grow 4.6% year-over-year to $2.61 billion for the same period. Moreover, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters, which is impressive.
Shares of REVG have gained 77.1% over the past six months and 129.7% over the past year to close the last trading session at $21.80.
REVG’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
REVG has a B grade for Sentiment, Quality, and Value. It is ranked #7 among 51 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have REVG’s ratings for Growth, Momentum, and Stability. Get all REVG ratings here.
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VLVLY shares were unchanged in premarket trading Wednesday. Year-to-date, VLVLY has gained 7.16%, versus a 6.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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