The auto industry thrives on constant consumer demand, economic expansion, smart tech innovations, EV adoption, government incentives, global supply chain enhancements driving long-term growth. Additionally, the potential interest rate cuts this year further promise cheaper borrowing, boosting industry prospects.
Given this backdrop, investors could consider buying fundamentally strong auto stocks such as Stellantis N.V. (STLA), General Motors Company (GM), and PACCAR Inc (PCAR) to one’s portfolio.
The auto industry is witnessing growth propelled by technological advancements, including electric and hybrid vehicles, which offer improved efficiency and reduced emissions. Moreover, features like connectivity and autonomous driving are enhancing safety and convenience, attracting consumers. Also, the rising demand in emerging markets further contributes to this growth. In addition, government incentives, such as tax credits for electric vehicles, and regulations promoting clean energy adoption, play a significant role.
The global outlook for the auto industry remains positive with solid growth expected, especially in regions like China and Eastern Europe, contributing to a 3% increase in global light-vehicle sales for 2024. The global automotive industry is expected to grow at a CAGR of 6.8%, reaching $6.86 trillion by 2033.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Auto & Vehicle Manufacturers stocks mentioned above, starting with the third choice.
Stock #3: Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA designs, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems worldwide.
On May 14, 2024, STLA announced the establishment of Leapmotor International, a joint venture focused on expanding global electric vehicle sales, starting in September 2024 in Europe and later in other regions, featuring innovative models like the T03 and C10 with plans for rapid scale and international market penetration.
The partnership aims to leverage STLA's expertise in electric vehicle technology and Leapmotor's strong presence in the Chinese market to drive growth and establish a strong foothold in the global electric vehicle industry.
On April 10, 2024, STLA announced the launch of electrified dual-clutch transmissions (eDCTs) at Mirafiori, part of a €240 million ($259.24 million) investment in transforming the site into Mirafiori Automotive Park 2030, including a further €100 million ($108.02 million) for enhancing the Fiat 500e, aiming to make it more affordable and boost electric vehicle production in the Mirafiori complex.
In terms of forward non-GAAP P/E, STLA’s 4x is 74.8% lower than the 15.91x industry average. Its 2.31x forward EV/EBITDA is 76.5% lower than the 9.82x industry average. Likewise, its 3.21x forward EV/EBIT is 77.2% lower than the 14.05x industry average.
STLA’s net revenues for the fiscal year ended December 31, 2023, increased 5.5% year-over-year to €189.54 billion ($204.74 billion). Its net profit increased 11% year-over-year to €18.63 billion ($20.12 billion). Its adjusted operating income rose 1.4% year-over-year to €24.34 billion ($26.29 billion). The company’s adjusted EPS came in at €6.42, representing an increase of 7.2% year-over-year.
Analysts expect STLA’s revenue for the quarter ending September 30, 2024, to increase 4.7% year-over-year to $49.99 billion. Over the past year, the stock has gained 44% to close the last trading session at $23.32.
STLA’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #18 out of 51 stocks in the Auto & Vehicle Manufacturers industry. It has an A grade for Value. To see STLA’s Growth, Momentum, Stability, Sentiment, and Quality ratings, click here.
Stock #2: General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts; and provides software-enabled services and subscriptions worldwide. The company operates through GM North America, GM International, Cruise, and GM Financial segments. It markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Baojun, and Wuling brand names.
On April 3, 2024, GM announced delivering over 441,000 vehicles in China during Q1 2024, including a record number of NEVs and plans for new plug-in hybrid models like Buick's GL8 and Cadillac's OPTIQ, aiming to meet diverse consumer needs and accelerate electrification efforts.
The company's strong performance in the Chinese market reflects its commitment to expanding its electric vehicle lineup and capturing a larger share of the growing NEV market. GM's strategic focus on innovation and sustainability positions it well for continued success in the region.
On February 15, 2024, GM announced expanding its Super Cruise technology to cover approximately 750,000 miles of compatible roads in the U.S. and Canada, making it the largest hands-free operating domain in North America and enhancing its capabilities with features like Hands-Free Trailering.
This expansion reflects GM's commitment to advancing driver assistance systems and ensuring a safe and exciting future of transportation.
In terms of forward non-GAAP PEG, GM's 0.43x is 73.5% lower than the 1.63x industry average. Its 0.91x forward EV/Sales is 25.7% lower than the 1.22x industry average. Likewise, its 0.29x forward Price/Sales is 67.7% lower than the 0.90x industry average.
GM’s revenue for the fiscal first quarter that ended March 31, 2024, increased 7.6% year-over-year to $43.01 billion. Its adjusted automotive free cash flow stood at $1.09 billion, compared to an adjusted automotive free cash flow deficit of $132 million in the year-ago quarter.
For the same quarter, its net income attributable to stockholders increased 24.4% year-over-year to $2.98 billion. also, its adjusted EPS came in at $2.62, representing an increase of 18.6% year-over-year.
Street expects GM's EPS for the quarter ending June 30, 2024, to increase 37.5% year-over-year to $2.63. Likewise, its revenue for the same quarter is expected to increase marginally year-over-year to $45.20 billion. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 59.7% to close the last trading session at $45.03.
GM's POWR Ratings reflect its positive outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system.
In the same industry, GM is ranked #15. It has a B grade for Growth, and Value. Click here to see GM's Momentum, Stability, Sentiment, and Quality ratings.
Stock #1: PACCAR Inc (PCAR)
PCAR designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks internationally. It operates through three segments: Truck, Parts, and Financial Services.
In terms of forward non-GAAP P/E, PCAR’s 13.02x is 32.4% lower than the 19.25x industry average. Similarly, its 13.15x forward EV/EBIT is 18.4% lower than the 16.11x industry average.
During the first quarter, which ended March 31, 2024, PCAR’s sales and revenues grew 3.2% year-over-year to $8.74 billion. The company’s net income and net income per share rose 62.9% and 62.1% over the prior-year quarter to $1.20 billion and $2.27, respectively.
For fiscal 2025, PCAR’s EPS and revenue are expected to increase 4.1% and 5% year-over-year to $8.65 and $33.46 billion, respectively. It surpassed the consensus EPS and revenue estimates in each of the trailing four quarters. Over the past year, the stock has gained 53.7% to close the last trading session at $108.12.
PCAR’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Stability, Sentiment, and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #13. Beyond the grades mentioned above, we have also rated PCAR for Growth, Value, and Momentum. Get all ratings here.
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STLA shares were trading at $23.23 per share on Wednesday afternoon, down $0.09 (-0.39%). Year-to-date, STLA has declined -0.39%, versus a 11.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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