The automotive industry is thriving due to factors like rapid urbanization and advancements in electric vehicles and autonomous driving systems. While I think quality auto stocks Blue Bird Corporation (BLBD) and Strattec Security Corporation (STRT) could be solid buys now, Nikola Corporation (NKLA) might be best avoided this month, given its weak fundamentals.
Increasing demand for high-end passenger vehicles, urbanization and rising infrastructure spending in the economy are driving the automotive market growth. Thus, the global automotive industry is projected to grow at a 6.9% CAGR, reaching $6.95 trillion by 2030.
Besides, the global auto parts and accessories market is estimated to total $1.09 trillion by 2031, growing at a 5.7% CAGR. This growth can be attributed to several factors, including advancements in areas such as electric vehicles (EVs), autonomous driving systems, and connectivity features which create new demands for specialized components and accessories.
In addition, S&P Global Mobility forecasts global new vehicle sales of 88.30 million in 2024, a 2.8% increase year-over-year. Moreover, investors’ interest in auto stocks is evident from the First Trust S-Network Future Vehicles & Technology ETF (CARZ) 20.6% returns over the past year.
Considering these encouraging trends, let’s take a look at the fundamentals of the three auto industry stocks.
Stocks to Buy:
Blue Bird Corporation (BLBD)
BLBD designs, engineers, manufactures, and sells school buses internationally. The company operates through two segments, Bus and Parts.
On May 1, 2024, BLBD extended its exclusive clean school bus collaboration with Ford Component Sales and ROUSH CleanTech to 2030. The agreement strengthens BLBD’s industry leadership in low- and zero-emission student transportation. BLBD is now the only school bus manufacturer in the United States to offer propane- and gasoline-powered school buses that will meet more stringent emission standards taking effect in 2027.
On February 1, BLBD announced its plans to repurchase up to $60 million in the aggregate of its outstanding common stock during the next 24 months. The repurchase program permits repurchases in open market or private transactions, including accelerated share repurchase transactions, block trades, or pursuant to trading plans intended to comply with SEC Rule 10b5-1.
BLBD’s trailing-12-month ROCE of 153.15% is significantly higher than the industry average of 12.40%. Also, the stock’s trailing-12-month ROTC and ROTA of 44.21% and 17.56% are 517.9% and 260.3% higher than the industry averages of 7.15% and 4.87%, respectively.
In the fiscal second quarter ended March 30, 2024, BLBD’s net sales increased 34.8% year-over-year to $345.92 million. Its non-GAAP net income and EPS increased 240.7% and 229.6% year-over-year to $29.30 million and $0.89, respectively.
Analysts expect BLBD’s revenue for the fiscal third quarter ending June 2024 to increase 10.9% year-over-year to $326.31 million. For the same quarter, Street expects its EPS to increase 22.4% year-over-year to $0.54. The company surpassed its EPS and revenue estimates in each of the trailing four quarters, which is promising.
BLBD’s stock has soared 162.6% over the past six months to close the last trading session at $46.72.
BLBD’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 Growth and Quality. It is ranked #10 in the 51-stock Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we’ve also rated BLBD for Value, Momentum, Sentiment, and Stability. Get all BLBD ratings here.
Strattec Security Corporation (STRT)
STRT designs, develops, manufactures, and markets automotive access control products under the VAST Automotive Group brand primarily in North America. The company provides mechanical and electronically enhanced locks and keys, passive entry passive start systems, power deck lid systems, door handles, and related products.
STRT’s trailing-12-month asset turnover ratio of 1.57x is 58.6% higher than the industry average of negative 0.99x. Its trailing-12-month cash per share of 2.90x is 13.2% higher than the 2.56x industry average.
During the third quarter ended March 31, 2024, STRT reported net sales of $140.77 million, marking a 10.7% increase from a year-ago quarter. Its net income came in at $1.13 million, compared to a loss of $3.29 million in the previous-year quarter. Also, its earnings per share came in at $0.37, compared to negative $0.57 in the previous-year quarter.
Street expects STRT’s revenue to increase 2.4% year-over-year to $135.33 million for the fiscal first fourth quarter ending June 2024. Its EPS is expected to be $0.11 in the same quarter.
Shares of STRT have gained 20.5% over the past year to close the last trading session at $22.38.
STRT’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
STRT has an A grade for Sentiment and a B in Value, Stability, and Growth. It is ranked #10 out of 60 stocks in the A-rated Auto Parts industry.
In addition to the POWR Ratings highlighted above, one can access STRT’s ratings for Quality and Momentum here.
Stock to Sell:
Nikola Corporation (NKLA)
NKLA is a technology innovator and integrator that develops energy and transportation solutions internationally. The company operates in truck and energy units. It commercializes battery electric vehicles (BEV) and hydrogen fuel cell electric vehicles (FCEV) to the trucking sector.
NKLA’s trailing-12-month ROCE of negative 153.18% is lower than the industry average of 12.40%. Its trailing-12-month ROTC of negative 45.38% is lower than the industry average of 7.15%. Also, its trailing-12-month ROTA of negative 82.01% is lower than the industry average of 4.87%.
NKLA’s revenues for the fiscal first quarter ended March 31, 2024, declined 29.8% year-over-year to $7.50 million. Its non-GAAP net loss came in at $116.90 million for the same quarter. Additionally, its net loss per share came in at $0.09. Also, as of March 31, 2024, the company’s total assets stood at $1.15 billion, compared to $1.27 billion at the end of the fiscal year ended December 31, 2023.
NKLA’s EPS is projected to be negative $0.09 for the fiscal second quarter ending June 2024. Its revenue is expected to be $21.85 million for the same quarter. Also, the stock failed to surpass the EPS and revenue estimates in three of the trailing four quarters, which is disappointing.
The stock has plunged 70.3% over the past nine months to close the last trading session at $0.58.
NKLA’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It also has an F grade in Quality and Stability and a D in Value and Sentiment. NKLA is ranked #47 in the Auto & Vehicle Manufacturers industry.
For additional POWR Ratings of NKLA (Growth and Momentum), click here.
What To Do Next?
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BLBD shares rose $0.23 (+0.49%) in premarket trading Friday. Year-to-date, BLBD has gained 74.15%, versus a 10.02% 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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