The global automobile sector’s growth prospects appear promising due to robust demand for new vehicles, the ongoing shift to electric vehicles (EVs) and hybrids, improving inventories, easing supply chains, rising disposable incomes, investments in public charging infrastructure, expectations of a soft economic landing and interest rate cuts later this year.
Against this backdrop, investors could consider buying and holding fundamentally strong auto stocks such as Stellantis N.V. (STLA), Bayerische Motoren Werke Aktiengesellschaft (BMWYY), and DENSO Corporation (DNZOY) for long-term gains. Before delving deeper into their fundamentals, let’s discuss what’s shaping the auto industry’s prospects.
The global auto industry is expected to grow significantly in the coming years as electric vehicle technology advances, and there is a greater demand for sustainable transportation. New vehicle sales in the United States increased 5.1% between January and March, as consumers remained in the market despite high-interest rates.
This increase in new car sales reflects a healthy trend in the automotive industry, bolstered by sustained consumer demand and strengthened supply chains. S&P Global expects global light vehicle sales will increase 2% to 3% over 2024 and 2025. Also, the global automotive market is expected to reach $6.86 trillion by 2033, expanding at a CAGR of 6.8%.
Furthermore, the global auto parts and accessories market is estimated to reach $1.09 trillion by 2031, growing at a 5.7% CAGR. This growth can be attributed to several factors, including increasing vehicle production and sales worldwide. Additionally, the rising usage of advanced components in today’s cars requires more maintenance and frequent replacements.
Moreover, automotive DIY is gaining popularity as people look to service and maintain their vehicles. Investors’ interest in auto stocks is evident from the First Trust S-Network Future Vehicles & Technology ETF (CARZ) 18% returns over the past year.
With these favorable trends in mind, let’s delve into the fundamentals of the three auto stocks mentioned above.
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. It offers its products under the Abarth, Alfa Romeo, Chrysler, DS, Dodge, Jeep, Fiat, Maserati, Ram, Opel, Lancia, Vauxhall, and Peugeot brands.
On April 10, 2024, STLA announced the start of eDCT production at Mirafiori as part of a €240 million ($260.62 million) makeover to construct Mirafiori Automotive Park 2030. They're spending an additional €100 million ($108.59 million) on the legendary Fiat 500e to improve pricing and production at Mirafiori, which aligns with their environmental ambitions and strengthens Italy's automotive industry.
In terms of the trailing-12-month net income margin, STLA’s 9.81% is 114.3% higher than the 4.58% industry average. Likewise, its 14.62% EBITDA margin is 33.1% higher than the 10.99% industry average. Additionally, its 24.20% trailing-12-month Return on Common Equity is 113.5% higher than the industry average of 11.33%.
STLA’s net revenues for the fiscal year ended December 31, 2023, increased 5.5% year-over-year to €189.54 billion ($205.83 billion). Its net profit increased 11% year-over-year to €18.63 billion ($20.23 billion). Its adjusted operating income rose 1.4% year-over-year to €24.34 billion ($26.43 billion). The company’s adjusted EPS came in at €6.42, representing an increase of 7.2% year-over-year.
STLA’s revenue for the year ended December 31, 2025, is expected to increase 3% year-over-year to $207.94 billion. The stock has gained 53% over the past year to close the last trading session at $24.60.
STLA’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
STLA has an A grade for Value and a B for Stability and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #10 out of 51 stocks. To see STLA’s additional Growth, Momentum, and Sentiment ratings, click here.
Bayerische Motoren Werke Aktiengesellschaft (BMWYY)
Based in Munich, Germany, BMWYY is an international automotive company specializing in producing and selling automobiles and motorcycles under renowned brands such as BMW, MINI, and Rolls-Royce. The company operates worldwide through a network of independent dealerships and importers.
BMWYY’s trailing-12-month CAPEX / Sales of 7% is 128.5% higher than the industry average of 3.06%. Additionally, its 11.81% trailing-12-month EBIT margin is 55.5% higher than the industry average of 7.59%. Also, its 7.26% trailing-12-month net income margin is 58.6% higher than the industry average of 4.58%.
For the fiscal year ended December 31, 2023, BMWYY’s revenues increased 9.2% year-over-year to €107.84 billion ($115.77 billion). The company achieved gross profit of €17 billion ($18.25 billion) and net profit of €4.37 billion ($4.69 billion). Also, its cash and cash equivalents as of December 31, 2023, amounted to €6.15 billion ($6.60 billion).
Analysts expect BMWYY’s revenue for the quarter ending September 30, 2024, to increase 1.3% year-over-year to $41.78 billion. Its EPS for fiscal 2024 is expected to grow 2.4% year-over-year to $6.48. BMWYY’s shares have gained 16.6% over the past six months to close the last trading session at $37.60.
It’s no surprise that BMWYY has an overall B rating, equating to a Buy in our POWR Ratings system.
It has an A grade for Stability and a B for Value. It is ranked #20 in the same industry. Beyond what is stated above, we’ve also rated BMWYY for Growth, Momentum, Sentiment, and Quality. Get all BMWYY ratings here.
DENSO Corporation (DNZOY)
Headquartered in Kariya, Japan, DNZOY manufactures and sells automotive parts in Japan, the rest of Asia, North America, Europe, and internationally. It operates through powertrain system, electrification system, electronic system, thermal system, mobility system, industrial equipment, and life-related equipment segments.
In terms of the trailing-12-month CAPEX / Sales, DNZOY’s 5.42% is 77% higher than the 3.06% industry average.
During the fiscal year that ended March 31, 2024, DNZOY’s revenue and gross profit increased 11.6% and 19.6% from the prior-year period to ¥7.14 trillion ($45.58 billion) and ¥1.09 trillion ($6.95 billion), respectively.
For the same period, its operating profit stood at ¥380.60 billion ($2.43 billion). Its profit for the period attributable to owners of the parent company and earnings per share stood at ¥312.79 billion ($2 billion) and ¥104.97, respectively.
Street expects DNZOY’s revenue for fiscal 2024 to increase 91.3% year-over-year to $46.02 billion. Over the past year, the stock has gained 27.1% to close the last trading session at $17.89.
DNZOY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Stability and a B for Growth and Quality. It is ranked #16 out of 62 stocks in the A-rated Auto Parts industry. Click here to see DNZOY's ratings for Value, Momentum, and Sentiment.
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STLA shares rose $0.19 (+0.77%) in premarket trading Friday. Year-to-date, STLA has gained 6.26%, versus a 7.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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