The automotive industry confronted substantial worldwide upheavals, including COVID-19, Asia-Pacific tensions, and the Russia-Ukraine war in the recent past. Scarcities ranging from microchips to labor also affected almost every facet of the automotive supply chain, causing ripple effects throughout various stages of the process.
With industry-wide challenges gradually receding, the automotive industry is poised for substantial growth in the coming years. To that end, it could be wise to explore auto stocks Tesla, Inc. (TSLA), Harley-Davidson, Inc. (HOG), and Blue Bird Corporation (BLBD) which are backed by robust profitability. Let’s understand this in detail.
Following a challenging period, the automotive industry is now embracing a significant worldwide shift, an unwavering commitment to Electric Vehicle (EV) advancement. Vehicle manufacturers are amplifying their research and development endeavors, showcasing resolute determination to propel the evolution of EV technology.
Automakers are also swiftly incorporating advanced driver assistance systems into modern EVs to attract young drivers. These vehicles feature state-of-the-art technology and smartphone-like elements, presenting a compelling proposition to the younger demographic.
Additionally, they are emphasizing tailored in-vehicle experiences through the integration of digital cockpits, biometrics, and voice-activated services. They foresee a shift from touch controls to haptic feedback and voice commands, supported by AI-powered digital assistants, driving the advancement of display screens.
That said, U.S. light vehicle sales will likely rebound in July, with S&P Global Mobility projecting a jump to 1.33 million units, marking an 18% year-over-year rise. Notably, the organization has also revised its 2023 U.S. light vehicle sales projection to 15.4 million units, a positive adjustment from the earlier estimate of 15.1 million units.
Looking forward, the global automotive market is expected to grow at a CAGR of 4.5% and reach $28.7 billion by 2030. The Global X Autonomous & Electric Vehicles ETF's (DRIV) 21% year-to-date returns also underscore investors' keen interest in auto stocks.
Let’s now examine quality auto stocks TSLA, HOG, and BLBD in detail.
Tesla, Inc. (TSLA)
TSLA develops, manufactures, and markets electric vehicles and also offers energy generation and storage systems. Its automotive segment handles EV design, production, leasing, and regulatory credit sales. The energy generation and storage segment involves solar product design, sales, installation, and services.
On August 16, Texas endorsed a requirement for firms to integrate TSLA's technology in EV charging stations for federal fund eligibility. Texas, the largest beneficiary of a $5 billion program to electrify U.S. highways, advances TSLA's goal of establishing its tech as the U.S. charging norm, potentially boosting company growth.
On the same day, TSLA introduced a budget-friendly iteration of the S and X models, labeled "Standard Range," priced exactly $10,000 lower than their U.S. counterparts. The strategic pricing maneuver is anticipated to expand TSLA's customer pool, potentially enhancing its market presence.
TSLA’s trailing-12-month EBITDA margin of 17.86% is 66.4% higher than the 10.74% industry average. Its trailing-12-month net income margin of 12.97% is 210.5% higher than the industry average of 4.18%. In addition, the stock’s trailing-12-month CAPEX/Sales of 8.29% is 158.3% higher than the industry average of 3.21%.
TSLA’s total revenues increased 47.2% year-over-year to $24.93 billion in the fiscal second quarter that ended June 30, 2023. Its adjusted EBITDA grew 22.7% from the year-ago value to $4.65 billion.
Additionally, the company’s non-GAAP net income and non-GAAP EPS attributable to common stockholders increased 20.2% and 19.7% year-over-year to $3.15 billion and $0.91, respectively.
For the fiscal year ending December 2024, TSLA’s revenue is expected to increase 28.5% year-over-year to $128.66 billion. The company’s EPS for the next year is expected to come in at $4.92, up 42.7% from the prior year. Moreover, the company surpassed the consensus EPS estimates in three of the four trailing quarters.
Shares of TSLA have surged 108.7% year-to-date to close the last trading session at $225.60.
TSLA’s fundamentals are apparent in its POWR Ratings. TSLA has a B grade for Quality. It is ranked #39 in the 55-stock Auto & Vehicle Manufacturers industry. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
In addition to the POWR Ratings I’ve just highlighted, you can see TSLA’s ratings for Growth, Value, Stability, Momentum, and Sentiment here.
Harley-Davidson, Inc. (HOG)
HOG operates through three segments, Harley-Davidson Motor Company (HDMC) for motorcycle design and sales; LiveWire for electric bikes, parts, and accessories; and Harley-Davidson Financial Services (HDFS) for financing and servicing inventory and consumer loans, primarily for Harley-Davidson and LiveWire motorcycle purchases.
On July 27, HOG reported pre-orders surpassing expectations for its new Indian model, developed in partnership with a local manufacturer. HOG aims to tap into India's lucrative motorbike market, capitalizing on strong premium segment trends, potentially boosting its financial prospects.
HOG’s trailing-12-month EBITDA margin of 18.95% is 76.5% higher than the 10.74% industry average. Moreover, the stock’s trailing-12-month net income margin of 13.03% is 212% higher than the industry average of 4.18%. Also, its trailing-12-month cash from operations of $714.80 million is 232.6% higher than the $214.88 million industry average.
During the second quarter that ended June 30, 2023, HOG’s gross profit from the HDMC segment increased 7.8% year-over-year to $417.47 million. Its revenue from the HDFS segment grew 18.6% from the year-ago value to $240.36 million.
Also, the company’s total investment income stood at $11.15 million, compared to an investment loss of $3.53 million in the prior year’s period. Moreover, as of June 30, 2023, the company’s cash and cash equivalents came in at $1.52 billion, compared to $1.43 billion as of December 31, 2022.
The consensus revenue estimate of $5.15 billion for the fiscal year ending December 2024 reflects a 3.3% year-over-year improvement. Likewise, the consensus EPS estimate for the same period is expected to grow 5.1% from the previous year to $4.85. Also, the company surpassed the consensus revenue and EPS estimates in three of the four trailing quarters.
Shares of HOG have marginally gained over the past three months, closing the last trading session at $33.06.
HOG’s solid outlook is reflected in its POWR Ratings. HOG has a B grade for Quality and Value. It is ranked #31 out of 55 stocks within the Auto & Vehicle Manufacturers industry.
Click here to access additional HOG ratings (Growth, Stability, Momentum, and Sentiment).
Blue Bird Corporation (BLBD)
BLBD is a school bus designer and manufacturer, with a focus on electric and low-emission models. It has a fleet of more than 20,000 propane, natural gas, and electric buses. The company operates through two segments, Bus and Parts.
Following significant progress in its fiscal third quarter, BLBD has increased its annual financial forecast. The company has adjusted its fiscal 2023 guidance upwardly, expecting net revenue to slightly surpass $1.1 billion, alongside an adjusted EBITDA range of $70-76 million and an adjusted free cash flow spanning $70-80 million.
Furthermore, BLBD has reiterated its long-term outlook of achieving profitable expansion, targeting $2 billion in revenues and a 12% adjusted EBITDA margin, equivalent to $250 million.
Moreover, on August 15, BLBD announced its provision of 20 electric school buses to Miami-Dade County Public Schools (M-DCPS) in Florida, marking the district's first zero-emission vehicles within its all-Blue Bird bus fleet. This could lead to increased demand for BLBD’s electric buses and position it as a forward-thinking provider in the market.
BLBD’s trailing-12-month levered FCF margin of 10.93% is 102% higher than the 5.41% industry average. In addition, its trailing-12-month asset turnover ratio of 2.55x is 215.2% higher than the industry average of 0.81x.
For the fiscal third quarter that ended July 1, 2023, BLBD’s net sales increased 42.8% year-over-year to $294.28 million. Its adjusted EBITDA grew 218.6% from the year-ago value to $28.02 million.
Moreover, the company’s adjusted net income and adjusted EPS came in at $14.49 million and $0.44, compared to an adjusted loss and adjusted loss per share of $2.87 million and $0.09 in the previous year’s period.
Analysts expect BLBD’s revenue to increase 7.4% year-over-year to $1.20 billion for the fiscal year ending September 2024. The company’s EPS for the next year is expected to come in at $1.39, up 57% from the prior year. Furthermore, the company topped the consensus revenue estimates in all four trailing quarters, which is impressive.
Over the past year, the stock has gained 61.8%, closing the last trading session at $20.45.
BLBD’s positive outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
BLBD has a B grade for Growth, Quality, and Sentiment. It is ranked #15 out of 55 stocks within the same industry.
Click here to access additional BLBD ratings for Value, Momentum, and Stability.
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TSLA shares were trading at $223.00 per share on Thursday afternoon, down $2.60 (-1.15%). Year-to-date, TSLA has gained 81.04%, versus a 15.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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