Since last year, the auto manufacturing industry has been facing supply chain disruptions and production constraints. Geopolitical tensions have worsened these industry headwinds due to Russia’s invasion of Ukraine, along with the resurgence of new COVID-19 cases in China. Despite these logistical challenges, the growth in the auto manufacturing sector is driven by substantial demand in the consumer and commercial segments. And investors’ interest in the industry is evident in First Trust S-Network Future Vehicles & technology ETFs (CARZ) 3.6% gains over the past month.
The industry is expected to benefit from the adoption of technological advancements in manufacturing processes. Companies in the automotive industry have been using robots on assembly lines to enhance productivity. The factories are also adopting technologies like IoT and machine learning to manage their production lines, and intelligent components like sensors to gather data about automotive performance.
Given this backdrop, we think it could be wise to now add quality auto manufacturing stocks Honda Motor Co., Ltd. (HMC), Nissan Motor Co., Ltd. (NSANY), Stellantis N.V. (STLA), and Volkswagen AG (VWAGY), which have promising growth potential.
Click here to check out our Automotive Industry Report for 2022
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, markets, and distributes motorcycles, automobiles, and power products in Japan, North America, Europe, Asia, and internationally. The company operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life creation; and Other Businesses.
Last week, HMC and General Motors (GM) announced plans to co-develop a series of affordable electric vehicles (EVs) on a global scale based on a new global architecture and using Ultium battery technology. HMC and GM discussed the future EV battery technology collaboration opportunities to drive down costs, improve performance and drive sustainability for future vehicles. HMC is expected to benefit from the sales of electric vehicles, further boosting its profitability.
HMC’s interest income increased 63.1% year-over-year to JPY7.66 billion ($61.14 million) in its fiscal year 2022 third quarter, ended Dec. 31, 2021. The company’s comprehensive income grew 35.2% year-over-year to JPY 425.87 billion ($3.40 billion). Its comprehensive income for the period attributable to owners of the parent increased 35.9% from its year-ago value to JPY 403.39 billion ($3.22 billion).
Analysts expect HMC's revenue for its fiscal year 2022 ended March 31, 2022, to come in at $116.15 billion, representing a 310.6% rise year-over-year.
HMC stock has declined 8.5% in price year-to-date and closed yesterday's trading session at $26.04.
HMC's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has an A grade for Value and a grade B for Stability, Sentiment, and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #4 of 67 stocks.
To see additional POWR Ratings (Growth and Momentum) for HMC, click here.
Nissan Motor Co., Ltd. (NSANY)
NSANY manufactures, markets, and sells vehicles and automotive parts worldwide and is headquartered in Yokohama, Japan. The company sells vehicles under the Nissan, Datsun, Heritage, and Motorsports brands. NSANY provides vehicle and vehicle parts, engines, automotive parts, and specially equipped vehicles. In addition, it offers financial services, auto credit and car leasing, and insurance services.
This month, NSANY unveiled its prototype production facility for battery cells, which it aims to bring to the market in 2028. The company expects to use the laminated all-solid-state battery cells for various vehicle segments and to make its EVs more competitive.
In February, NSANY announced plans to build two new, all-electric models at its Mississippi assembly plant. This Canton Vehicle Assembly Plant will become a center for U.S. EV production. The investment for EV production will amount to $500 million, which will support preserving and upskilling approximately 2,000 jobs and transforming the center with the latest technology and training. With an increased production of electric vehicles and battery packs, the company is expected to boost its revenue streams.
In its fiscal 2022 third quarter, ended Dec. 31, 2021, NSANY's operating income increased 92.6% year-over-year to JPY 52.20 billion ($416.62 million). Its ordinary income improved 361.3% from the prior-year period to JPY 71.50 billion ($570.65 million). NSANY’s net income attributable to owners of the parent rose 186.5% year-over-year to JPY 32.70 billion ($260.98 million). And the company's earnings per share rose 186.5% year-over-year to JPY 8.35.
The $69.3 billion consensus revenue estimate for its fiscal year 2022 ended March 31, 2022, represents 207.7% growth from the last year.
NSANY stock decreased 24.6% in price over the past three months. It closed yesterday's trading session at $8.20.
NSANY’s POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
NSANY has a grade of A for Value and a B for Growth. It is ranked #8 in the Auto & Vehicle Manufacturers industry.
Click here to see NSANY’s POWR Ratings for Stability, Sentiment, Momentum, and Quality.
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA designs, manufactures, and sells automobiles and light commercial vehicles, transmission systems, engines, metallurgical products, and production systems worldwide. The company offers its products under the Abarth, Alfa Romeo, Fiat, Chrysler, Opel, Lancia, Jeep, and Teksid brand names. STLA sells its products directly and through distributors and dealers.
On April 1, STLA signed binding agreements with European banking partners, including BNP Paribas Personal Finance, Credit Agricole Consumer Finance, and Santander Consumer finance. These agreements might organize STLA’s current financial services platform in Europe efficiently and boost value creation across its financial services business.
Last month, STLA launched its new, two-liter, twin-turbo, six-cylinder engine named Hurricane. This new engine delivers better fuel economy and reduced emissions with more horsepower and torque than other competitors. It is expected to extend the company’s customer reach and boost revenues.
STLA's net revenues increased 13.6% year-over-year to €152.12 billion ($165.65 billion) in its fiscal year 2021 (ended Dec. 31, 2021). Its operating income improved 105.7% year-over-year to €15.30 billion ($16.66 billion). The company’s net profit increased 220.5% from the prior year to €14.34 billion ($14.34 billion). And its adjusted earnings per share rose 218.2% from the last year to €4.55.
Analysts expect STLA's revenue for its fiscal year 2022, ending Dec. 31, 2022, to come in at $179.93 billion, representing a 4.7% rise year-over-year.
The stock declined 19.3% in price year-to-date and closed yesterday's trading session at $15.14.
According to our POWR Ratings, STLA has a grade of A for Value and B for Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #3.
Click here to see additional component grades for STLA (Stability, Momentum, Value, and Sentiment).
Volkswagen AG (VWAGY)
VWAGY designs, manufactures, and sells automobiles primarily in Europe, North America, South America, and the Asia-Pacific. The company is headquartered in Wolfsburg, Germany. It operates through four segments: Passenger Cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services. VWAGY provides its products under the Volkswagen Passenger Cars, Audi, SEAT, Porsche, MAN, Ducati, Lamborghini, and Bugatti brands.
In March, VWAGY and Ford Motor Co. (F) expanded their e-mobility partnership to produce another electric model on the Modular Electric Toolkit (MEB) electric platform. “Profitability and speed are now crucial for finally achieving the breakthrough of e-mobility in Europe. We are tackling both together with Ford. Today’s agreement will further accelerate the electrification of the two companies,” stated Thomas Schmall, CEO of VWAGY.
In its fiscal year 2021, ended Dec. 31, 2021, VWAGY's sales increased 5% year-over-year to €70.92 billion ($77.23 billion). Its other operating income grew marginally year-over-year to €6.16 billion ($6.71 billion). The company’s cash-in-hand and bank balance improved 15.5% from the prior year to €10.17 billion ($11.07 billion).
The $291.11 billion consensus revenue estimate for its fiscal year 2022, ending Dec. 31, 2022, represents 6.3% growth from the same period in 2021. The $5.53 consensus EPS estimate for the to-be-reported quarter indicates a 70.2% year-over-year rise.
Shares of VWAGY have plunged 21.7% in price year-to-date and 26.3% over the past three months. It closed yesterday's trading session at $23.00.
VWAGY's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
It has a grade of B for Value, Quality, and Stability. Within the Auto & Vehicle Manufacturers, it is ranked #5 of 67 stocks.
To see additional POWR Ratings (Growth, Momentum, and Sentiment) for VWAGY, click here.
Click here to check out our Automotive Industry Report for 2022
HMC shares were trading at $25.89 per share on Tuesday morning, down $0.15 (-0.58%). Year-to-date, HMC has declined -9.00%, versus a -6.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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