Although the COVID-19 pandemic hit the auto manufacturing industry just as badly as to several other industries in the first half of 2020, automakers worldwide have seen a rapid surge in production since the third quarter. People have flocked to dealerships as public health distancing restrictions have been loosened in most areas.
Meanwhile, a global semiconductor chip shortage has made consumer vehicles pricier, thanks to rising demand. However, the auto industry is well-positioned to grow with the gradual resolution of the chip shortage. Chipmakers have pledged more than $700 billion to expand production capacities over the next decade. And the automotive industry is expected to grow at a 4.5% CAGR between 2021 - 2028.
Given this backdrop, we think auto manufacturing stocks of Daimler AG (DDAIF), Suzuki Motor Corporation (SZKMY), and Isuzu Motors Limited (ISUZY) could be no-brainer bets because of their solid fundamentals and growth prospects. These stocks are rated ‘Strong Buy’ in our proprietary rating system.
Click here to check out our Automotive Industry Report for 2021
Daimler AG (DDAIF)
This Stuttgart, a Germany-based owner of the Mercedes Benz brand, needs little introduction. DDAIF manufactures cars, trucks, buses, and vans in Germany and globally.
On October 1, DDAIF reported that most of its shareholders had supported the company’s decision of a spin-off of its truck and bus business as a separate holding named Daimler Truck Holding AG. Shareholders also supported the renaming of Daimler AG to Mercedes-Benz Group AG.
In July, the company declared that from 2025 onwards, all its newly launched vehicle architectures under the Mercedes-Benz brand name would be electric-only, providing customers with electric alternatives for every model manufactured. This move should ensure the brand's continued success in a market where the shift to EVs is picking up rapidly.
For its third fiscal quarter, ended September 30, DDAIF’s adjusted EBIT increased 3.8% year-over-year to €3.61 billion ($4.20 billion). Its net profit came in at €2.57 billion ($2.99 billion), up 19.2% from the same period last year, while its EPS stood at €2.31, registering a 20.9% year-over-year improvement.
A $13.64 consensus EPS estimate for the current year (fiscal 2021) indicates a 234.3% year-over-year increase. Likewise, the $200.90 billion consensus revenue estimate for the current year reflects an 8.1% rise from the prior year. Furthermore, DDAIF has an impressive earnings surprise history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 90.2% in price over the past year and 38.8% year-to-date to close yesterday’s trading session at $97.60.
DDAIF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
DDAIF has an A Value grade, and a Stability and Quality grade of B. In the 63-stock Auto & Vehicle Manufacturers industry, it is ranked #2. Click here to see the additional POWR Ratings for DDAIF (Growth, Momentum, and Sentiment).
Suzuki Motor Corporation (SZKMY)
SZKMY sells automobiles, motorcycles, and marine products globally. The company’s offerings include mini-vehicles, sub-contract vehicles, and standard-sized vehicles. It is headquartered in Hamamatsu, Japan.
On July 21, SZKMY joined the Commercial Japan Partnership (CJP) commercial vehicle project with Japanese automobile company Daihatsu Motor Co., Ltd. The new collaboration is expected to disseminate affordable and advanced technologies and provide improved logistics efficiency for vehicle fleets.
SZKMY’s net sales increased 98.8% year-over-year to ¥845.35 billion ($7.44 billion) in its first fiscal quarter, ended June 30. Its gross profit rose 54.7% from the prior-year quarter to ¥216.17 billion ($1.90 billion). Its comprehensive income came in at ¥57.40 billion ($505.38 million), up 253.7% year-over-year.
Analysts expect SZKMY’s revenue to increase 96.1% year-over-year to $30.60 billion in its current fiscal year (ending March 2022).
SZKMY’s stock has gained 8.6% in price over the past year to close yesterday’s trading session at $181.62. It has gained 15.3% over the past six months.
It is no surprise that SZKMY has an overall A rating which translates to Strong Buy in our POWR Rating system. The stock has an A grade for Growth and a B grade for Value and Quality. It is ranked #1 in the Auto & Vehicle Manufacturers industry.
To see the additional POWR Ratings for Momentum, Stability, and Sentiment for SZKMY, click here.
Isuzu Motors Limited (ISUZY)
ISUZY is a worldwide seller of commercial vehicles, diesel engines, and components. The company offers a wide variety of products, including heavy and medium-duty trucks, pickup vehicles, and industrial engines. It is based in Tokyo, Japan.
On September 24, ISUZY announced that its new passenger pickup vehicle (PPV) had been awarded a five-star rating by the Australasian New Car Assessment Program (ANCAP), based on the model’s superior safety features. The new accredited model can be expected to add to the company’s value stream.
In July, ISUZY declared that in collaboration with Hino Motors, Ltd., it would supply OEMs of light-duty diesel trucks for the North American market. This partnership should bolster the company’s operations in North America.
For its first fiscal quarter, ended June 30, ISUZY’s net sales climbed 61.7% year-over-year to ¥529.61 billion ($4.66 billion). Its operating income increased 2,613.1% from the same period last year to ¥59.34 billion ($522.43 million), while its profit stood at ¥53.92 billion ($474.72 million), up substantially from its negative year-ago value.
The Street’s 5.70 billion revenue estimate for the current quarter (ending December 2021) indicates a 16.3% year-over-year increase.
ISUZY’s stock has gained 72.7% in price over the past year and 45.5% year-to-date to close yesterday’s trading session at $13.76.
ISUZY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock has a Growth, Value, Stability, and Quality grade of B. It is ranked #4 in the Auto & Vehicle Manufacturers industry.
In addition to the POWR Rating grades we’ve stated above, one can see ISUZY ratings for Momentum and Sentiment here.
Click here to check out our Automotive Industry Report for 2021
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DDAIF shares were trading at $99.02 per share on Friday afternoon, up $1.42 (+1.45%). Year-to-date, DDAIF has gained 40.85%, versus a 23.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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