Thanks to technological advancements, the auto industry looks poised to thrive in the foreseeable future. Given the significant prospects of the sector, fundamentally strong auto stocks Toyota Motor (TM), General Motors (GM), and Blue Bird (BLBD) might be solid additions to one’s portfolio for potential gains. Read on.
Innovations and growing demand for electric vehicles are expected to drive the auto industry’s growth. So, I think it might be ideal to buy Toyota Motor Corporation (TM), General Motors Company (GM), and Blue Bird Corporation (BLBD), which look poised for potential gains in the near future.
The global automotive market is expected to grow to $28.70 billion by 2030, at a CAGR of 4.5%, fueled by the rising demand for personal and commercial vehicles, the rise of new technologies like electric and self-driving cars, and the growing awareness of safety and environmental issues among consumers.
Moreover, popular vehicles such as hatchbacks, sedans, and estates require regular service and maintenance, driving high-volume sales of the automotive market in this sector. The rise of plug-in hybrid and battery electric vehicles also contributes to its growth.
The global automotive parts aftermarket market in the US is estimated to grow at a CAGR of 7.7% between 2022 and 2027.
The electric vehicle (EV) industry is at the heart of the worldwide push towards a more sustainable future. As countries work towards reducing their carbon footprints, the demand for EVs is expected to increase aggressively.
Alex Black, chief marketing officer at EpicVIN, said, “Electric vehicles are becoming more popular in terms of car buying trends, there is a growing consumer desire for effective eco-friendly mobility.”
Furthermore, automakers and technology companies are forming partnerships due to the constantly evolving tech requirements in vehicles. This is especially necessary for electric, connected, and autonomous vehicles, which require specialized software and advanced technology to function safely.
Let’s discuss the stocks mentioned above in detail:
Toyota Motor Corporation (TM)
Headquartered in Toyota, Japan, TM designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories. It operates in Automotive; Financial Services; and All Other segments.
On May 2, 2023, TM and PACCAR Inc. (PCAR) announced an expansion of their joint efforts to develop and produce zero emissions, hydrogen fuel cell Kenworth and Peterbilt trucks powered by TM’s next-generation hydrogen fuel cell modules.
The expanded agreement supports ongoing development and commercialized zero-emission versions of the Kenworth T680 and Peterbilt 579 models featuring TM’s hydrogen fuel cell powertrain kit, with initial customer deliveries planned for 2024.
TM’s trailing-12-month EBITDA margin of 12.82% is 17.9% higher than the 10.88% industry average. Its trailing-12-month net income margin of 6.60% is 52.2% higher than the 4.33% industry average.
During the fiscal fourth quarter ended March 31, 2023, TM’s sales revenues increased 19.4% year-over-year to ¥9.69 trillion ($68.88 billion). Operating income increased 35.2% year-over-year to ¥626.9 billion ($4.46 billion), while its net income attributable to TM increased 3.4% year-over-year to ¥552.2 billion ($3.93 billion).
TM’s revenue is expected to increase 3.6% year-over-year to $66.19 billion for the fiscal first quarter ending June 2023. Also, it has surpassed revenue estimates in each of the trailing four quarters, which is impressive.
Shares of TM have gained 4.6% over the past month to close the last trading session at $140.08.
TM’s POWR Ratings reflect its promising outlook. 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, with each factor weighted to an optimal degree.
The stock has a B grade for Stability and Sentiment. It is ranked #22 out of 59 stocks in the Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we’ve also rated TM for Value, Growth, Quality, and Momentum. Get all TM ratings here.
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.
On April 25, GM and Samsung SDI announced today they plan to invest more than $3 billion to build a new battery cell manufacturing plant in the United States, which is targeted to begin operations in 2026.
On April 11, GM and Energy Exploration Technologies Inc. announced that GM Ventures has entered into a strategic agreement to develop EnergyX’s lithium extraction and refinery technology.
The collaboration is focused on unlocking the North American supply of lithium, a critical material for EV batteries, by using EnergyX’s innovative process to maximize efficiency while improving sustainability for GM’s rapidly scaling EV production.
GM’s trailing-12-month EBITDA margin of 11.05% is 1.6% higher than the 10.88% industry average. Its trailing-12-month net income margin of 5.84% is 34.8% higher than the 4.33% industry average.
On April 24, 2023, GM declared a quarterly dividend of $0.09 per share, payable on June 15, 2023. GM pays $0.36 annually as dividends. This translates to a yield of 1.08% at the current price, compared to the 4-year average dividend yield of 1.79%.
GM’s revenue for the first quarter ended March 31, 2023, increased 11.1% year-over-year to $39.99 billion. The company’s automotive operating cash flow increased 36.5% year-over-year to $2.23 billion.
Also, its adjusted net income attributable to common stockholders increased 0.9% year-over-year to $3.10 billion, and adjusted EPS came in at $2.21, representing an increase of 5.7% over the prior-year quarter.
Street expects GM’s revenue to grow 17.1% year-over-year to $41.87 billion in the current fiscal quarter (ending June 2023). Its EPS for the same quarter is expected to increase 45.6% year-over-year to $1.66. Additionally, it has topped consensus EPS and revenue estimates in three of the trailing four quarters.
The stock has gained 3.3% over the past month to close its last trading session at $33.29.
It’s no surprise that GM has an overall rating of B, which translates to a Buy in our POWR Ratings system.
GM also has a B grade for Growth, Value, and Sentiment. It is ranked #19 in the same industry.
Click here for additional ratings for GM for Quality, Momentum, and Stability.
Blue Bird Corporation (BLBD)
BLBD designs, engineers, manufactures, and sells school buses and related parts in the United States, Canada, and internationally. It operates through two segments, Bus, and Parts.
Its trailing-12-month asset turnover ratio of 2.62x is 228.5% higher than the 0.80x industry average.
BLBD’s net sales increased 44.4% year-over-year to $299.81 million in the second quarter that ended April 30, 2023. Also, its net income came in at $7.13 million, compared to a loss of $12.15 million in the previous-year quarter. Its EPS came in at $0.22, compared to a negative of $0.38 in the previous-year quarter.
BLBD’s revenue is expected to increase 38.3% year-over-year to $285 million for the fiscal second quarter ending June 2023. Its EPS is expected to come to $0.24 in the same quarter. Also, it has surpassed revenue estimates in three of the trailing four quarters.
BLBD gained 146.7% year-to-date to close its last trading session at $26.30.
BLBD’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
BLBD also has an A grade for Sentiment and a B in Quality and Growth. It is ranked #23 in the same industry.
For additional ratings for BLBD’s Momentum, Stability, and Value, click here.
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TM shares were trading at $140.08 per share on Monday morning, up $0.48 (+0.34%). Year-to-date, TM has gained 2.56%, versus a 10.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor’s degree in finance and marketing and is pursuing the CFA program.Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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