High inflation, supply chain snarls, and high borrowing rates have challenged the auto industry over the past year. However, auto sales are expected to return to pre-pandemic levels this year, with a growth of 9%.
The auto parts industry’s prospects are closely linked to auto sales. To that end, it could be wise for investors to buy top-rated auto parts stocks Bridgestone Corporation (BRDCY), JTEKT Corporation (JTEKY), Modine Manufacturing Company (MOD), and Ituran Location and Control Ltd. (ITRN). These stocks are A (Strong Buy) rated in our POWR Ratings system and are trading under $25.
Before discussing these stocks in detail, let’s discuss what’s happening in the auto industry.
Vehicle sales took a hit in 2022, registering its worst full-year performance since 2011. New light-vehicle sales reached 13.70 million units last year, declining 8.2% year-over-year. However, with improving chip supplies and easing inflation, U.S. new-vehicle sales rose 7.5% in the first quarter.
Although rising interest rates and fears of a recession may pose challenges for the auto industry, easing supply of chips and other auto parts means improving shipments to dealers. The U.S. light vehicle market is projected to grow by around 10% to 12% in 2023, with sales of more than 14.50 million vehicles.
The global automotive market is expected to reach $28.70 billion by 2030 at a CAGR of 4.5%.
In addition, the auto parts manufacturing market is expected to grow at a CAGR of 3.5% until 2030, driven by rapid technological advancement. Demand for new technologies in the automobiles industry is leading to increased demand for superior auto components.
Amid this backdrop, it could be wise for investors to buy affordable top-rated auto parts stocks BRDCY, JTKEY, MOD, and ITRN.
Let’s delve deeper into these stocks to see why they are top-rated in our proprietary rating system.
Bridgestone Corporation (BRDCY)
Headquartered in Tokyo, Japan, BRDCY manufactures and sells tires and rubber products worldwide. It operates through two segments, Tires and Diversified Products.
On November 18, 2022, BRDCY announced an approximately $190 million investment to renovate and expand its tire manufacturing plant in Belén de Heredia, Costa Rica. The company will invest $250 million over five years. The investment will help increase production capacity by up to 36% by 2026.
In terms of forward P/E, BRDCY’s 10.45x is 29.4% lower than the 14.80x industry average. Its 7.71x forward EV/EBIT is 41% lower than the 13.07x industry average. Likewise, its 4.85x forward EV/EBITDA is 49% lower than the 9.50x industry average.
BRDCY’s revenue for the fiscal year ended December 31, 2022, increased 26.6% year-over-year to ¥4.11 trillion ($30.92 billion). The company’s gross profit increased 21% year-over-year to ¥1.59 trillion ($11.99 billion).
Its adjusted operating profit increased 22.4% from the prior-year quarter to ¥482.63 billion ($3.63 billion). Its profit from continuing operations came in at ¥311 billion ($2.34 billion). Moreover, its EPS from continuing operations came in at ¥439.09.
BRDCY’s EPS and revenue for fiscal 2023 are expected to increase 28.5% and 332.1% year-over-year to $1.92 and $31.69 billion, respectively. Over the past six months, the stock has gained 20% to close the last trading session at $20.05.
BRDCY’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. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #3 out of 60 stocks in the A-rated Auto Parts industry. In addition, it has an A grade for Stability and Quality and a B for Growth and Momentum. We have also given BRDCY grades for Value and Sentiment. Get all the BRDCY ratings here.
JTEKT Corporation (JTEKY)
Headquartered in Aichi, Japan, JTEKY manufactures and sells steering systems, driveline components, bearings, machine tools, electronic control devices, home accessory equipment, etc. It offers steering systems, driveline components, Torsen limited slip differential products, wheels, engine, and transmission products.
In terms of forward EV/Sales, JTEKY’s 0.31x is 72.7% lower than the 1.12x industry average. Its 0.21x forward Price/Sales is 75.4% lower than the 0.86x industry average. Likewise, its 9x forward EV/EBIT is 31.1% lower than the 13.07x industry average.
For the third quarter that ended December 31, 2022, JTEKY’s revenue increased 19.9% year-over-year to ¥1.22 trillion ($9.21 billion). The company’s business profit increased 27% from the prior-year quarter to ¥32.10 billion ($241.51 million).
Its profit attributable to owners of parents increased 81.2% year-over-year to ¥18.30 billion ($137.68 million). In addition, its EPS came in at ¥53.45, representing an 80.9% increase from the prior-year quarter.
JTKEY’s revenue for the fiscal quarter ended March 31, 2023, is expected to increase 12% year-over-year to $3.48 billion. Over the past year, the stock has gained 1.3% to close the last trading session at $22.73.
JTEKY’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It is ranked #6 in the same industry. The stock has an A grade for Value and a B for Momentum, Stability, and Quality. To see the other ratings of JTEKY for Growth and Sentiment, click here.
Modine Manufacturing Company (MOD)
MOD provides engineered heat transfer systems and heat transfer components for use in on- and off-highway original equipment manufacturer (OEM) vehicular applications. It operates through Climate Solutions and Performance Technologies segments.
On November 8, 2022, MOD announced the launch of its new production facility in Rockbridge, Virginia. The plant will manufacture cooling solutions under MOD’s Airedale brand to capitalize on the data center industry tailwinds.
MOD President and CEO Neil Brinker said, “The demand for data is growing exponentially, and the Rockbridge plant positions Modine to offer a full range of cooling solutions to serve North American customers in the growing data center market. The products we manufacture here are one way Modine is engineering a cleaner, healthier world.”
In terms of forward non-GAAP P/E, MOD’s 13.06x is 8.8% lower than the 14.31x industry average. Its 0.69x forward EV/Sales is 38.7% lower than the 1.12x industry average. Likewise, its 10.72x forward EV/EBIT is 18% lower than the 13.07x industry average.
For the fiscal third quarter that ended December 31, 2022, MOD’s net sales increased 11.5% year-over-year to $560 million. The company’s gross profit increased 30.8% year-over-year to $97.60 million. Its adjusted EBITDA rose 35.6% year-over-year to $53.30 million. In addition, its net earnings attributable to MOD came in at $24.50 million.
MOD’s revenue for the quarter ended March 31, 2023, is expected to increase 1.9% year-over-year $585.03 million. Its EPS for the quarter ending June 30, 2023, is expected to increase 43.8% year-over-year to $0.46. It has a commendable earnings surprise history, surpassing its consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 156.9% to close the last trading session at $22.94.
MOD’s POWR Ratings reflect its positive outlook. It has an overall rating of A, which equates to a Strong Buy. It is ranked #12 in the same industry. In addition, it has an A grade for Growth and Value and a B for Momentum and Sentiment.
Click here to see the other ratings of MOD for Stability and Quality.
Ituran Location and Control Ltd. (ITRN)
Headquartered in Azor, Israel, ITRN provides location-based telematics services and machine-to-machine telematics products. The company operates in two segments: Telematics services and Telematics Products.
In terms of forward non-GAAP P/E, ITRN’s 10.01x is 52.4% lower than the 21.02x industry average. Its 5.04x forward EV/EBITDA is 64.1% lower than the 14.06x industry average. Likewise, its 6.70x forward EV/EBIT is 61.4% lower than the 17.37x industry average.
For the fiscal fourth quarter that ended December 31, 2022, ITRN’s revenues increased 6.5% year-over-year to $74.95 million. The company’s operating income increased 7.9% year-over-year to $15.30 million. Its gross profit increased 6% year-over-year to $35.85 million.
Also, its net income attributable to the company came in at $9.57 million. Additionally, its EPS attributable to the company’s stockholders came in at $0.47, representing a 2.2% increase from the prior-year quarter.
IRTN’s EPS and revenue for the quarter ended March 31, 2023, are expected to increase 16.3% and 3.5% year-over-year to $0.50 and $74.62 million, respectively. The stock has gained 4.2% year to date to close the last trading session at $22.02.
It is no surprise that ITRN has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #5 in the Auto Parts industry. It has an A grade for Stability and a B for Growth, Value, and Quality.
In total, we rate ITRN on eight different levels. Beyond what we stated above, we have also given ITRN grades for Momentum and Sentiment. Click here to access the additional ratings of ITRN.
What To Do Next?
Get your hands on this special report:
What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low priced companies with the most upside potential in today’s volatile markets.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.
Click below now to see these 3 exciting stocks which could double or more in the year ahead.
BRDCY shares were trading at $19.94 per share on Tuesday afternoon, down $0.12 (-0.57%). Year-to-date, BRDCY has gained 13.10%, versus a 7.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
4 Top Rated Auto Parts Stocks Under $25 StockNews.com
