Despite facing challenges such as strikes and other impediments, the automotive landscape in the United States exhibited resilience in October, with new vehicle sales experiencing a 2% rise year-over-year to 1,211,131 units. So, I think investors could consider grabbing top auto stocks Bayerische Motoren Werke Aktiengesellschaft (BMWYY), Stellantis N.V. (STLA), and Honda Motor Co., Ltd. (HMC) this month.
In the midst of swift advancements in electric powertrains, advanced driver assistance systems, connected car technology, and alternative fuel solutions, the automotive industry is undergoing rapid transformation.
Value added in the Automotive Products market is projected to amount to $362.80 billion this year and grow at a CAGR of 2.20% until 2028. The market output is expected to be $1.11 trillion in 2023.
The U.S. motor vehicle production is expected to reach approximately 11.7 million units by 2025.
Furthermore, the automotive artificial intelligence market is thriving due to increased demand for self-driving cars and the integration of AI technologies into automotive systems. Advancements in machine learning algorithms and computer vision further drive AI adoption in the automotive industry.
The global automotive artificial intelligence (AI) market is expected to be worth $7 billion by 2027, with a CAGR of 24.1%.
However, leading auto company Tesla, Inc. (TSLA) faces increased competition in the evolving automotive market due to the rapid growth of traditional auto giants and the emergence of numerous smaller players, challenging TSLA's dominance.
Shares of TSLA plummeted 5.5% over the past month, closing the last trading session at $237.41.
In addition, TSLA reported a 22.4% year-over-year decline in total gross profit to $4.18 billion in the fiscal third quarter ended September 29, 2023. Its adjusted EBITDA decreased 24.4% from the previous-year quarter to $3.76 billion.
Moreover, its trailing-12-month gross profit and levered FCF margins of 19.81% and 1.68% are lower than industry averages of 35.74% and 5.33%.
So, let us examine the fundamentals of the top three stocks in the Auto & Vehicle Manufacturers industry that are better than TSLA, starting with the third in line.
Stock #3: Bayerische Motoren Werke Aktiengesellschaft (BMWYY)
Headquartered in Munich, Germany, BMWYY is a global auto company that manufactures and sells automobiles and motorcycles under brands like BMW, MINI, and Rolls-Royce. The company also provides financial services, including leasing and financing, and operates globally through independent dealerships and importers.
BMWYY’s trailing-12-month EBIT and EBITDA margins of 11.51% and 15.51% are 55.5% and 40.6% higher than the industry averages of 7.40% and 11.40%.
On October 26, 2023, BMWYY announced enhancements in its electromobility efforts with the Cell Manufacturing Competence Center (CMCC) in Parsdorf. This center produces innovative battery cells for the upcoming Neue Klasse models, aiming for a 30% increase in range. CMCC is vital to the BMW Group's commitment to advancing battery cell technology and promoting eco-friendly practices.
The company pays an annual dividend of $3.08, which translates to a yield of 9% on the current market price, higher than its four-year average yield of 5.03%. Its dividend payouts have grown at a CAGR of 50.1% over the past three years.
For the nine months ended September 30, 2023, BMWYY's revenues increased 9.2% year-over-year to €112.53 billion ($121.22 billion). It generated a gross profit of €21.83 billion ($23.51 billion), up 23% year-over-year. Its net profit and EPS amounted to €9.55 billion ($10.29 billion) and €23.89.
Also, its cash and cash equivalents as of 30 September amounted to € 23.12 billion ($ 24.90 billion).
Analysts expect BMWYY’s revenue and EPS to grow 2.6% and 32.2% year-over-year to $42.89 billion and $1.59 for the fourth quarter ending December 2023. The company has surpassed the revenue estimates in each of the trailing three quarters, which is impressive.
The stock has soared 17.2% over the past year and 15.3% year-to-date to close the last trading session at $34.21.
BMWYY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BMWYY has an A grade for Stability and a B for Value and Quality. Within the B-rated Auto & Vehicle Manufacturers industry, it is ranked #12 out of 52 stocks.
In addition to the POWR Ratings stated above, one can access BMWYY’s additional Growth, Momentum, and Sentiment ratings here.
Stock #2: Stellantis N.V. (STLA)
Based in Hoofddorp, the Netherlands, STLA is a global company that designs, manufactures, and sells a wide range of vehicles and automotive products worldwide. The company operates under various well-known brand names such as Abarth, Alfa Romeo, Chrysler, Citroën, DS, Dodge, Fiat, Jeep, Maserati, Ram, and others. It also provides services, including financing, leasing, and rental services.
STLA’s trailing-12-month EBIT and EBITDA margins of 12.46% and 14.94% are higher than the industry averages of 7.40% and 11.04%.
On October 26, STLA planned to invest €1.50 billion to acquire a significant 20% stake in Leapmotor, a fast-growing Chinese electric vehicle (EV) company. The two companies will form Leapmotor International, a joint venture focused on accelerating global sales of Leapmotor's EV products, leveraging STLA’s global assets.
The partnership aims to boost Leapmotor's sales in China and expand into international markets, starting with Europe. STLA will have two seats on Leapmotor's Board of Directors, and the joint venture expects to begin shipments in the second half of 2024. The investment aligns with STLA's Dare Forward 2030 strategy for electrification.
The company pays $1.48 annually, which translates to a yield of 7.32% on the prevailing price level, It has a four-year average dividend yield of 9.59%.
During the six months ended June 30, 2023, STLA's net revenues grew 11.8% year-over-year to €98.37 billion ($105.97 billion). The company generated adjusted operating income and net profit of €14.13 billion ($15.22 billion) and €10.92 billion ($11.76 billion), up 11% and 11.8% from the previous year's quarter. Additionally, its net cash and cash equivalents at the end of the period grew 5.7% year-over-year to €48.98 billion ($52.76 billion).
Street expects STLA's revenue to grow 13.1% year-over-year to $46.46 billion for the third quarter that ended September 2023. The company has surpassed the revenue estimates in each of the trailing three quarters.
Shares of STLA increased 36.8% over the past year and 42.6% year-to-date to close the last trading session at $20.25.
STLA’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
STLA has an A grade for Value and Sentiment and a B for Stability. Within the same industry, it is ranked #4.
Click here for STLA’s additional Growth, Momentum, and Quality ratings.
Stock #1: Honda Motor Co., Ltd. (HMC)
Based in Tokyo, Japan, HMC is a global company involved in the development, manufacturing, and distribution of motorcycles, automobiles, power products, and more. It operates through segments like Motorcycle, Automobile, Financial Services, and Power Product, offering a diverse range of products and services worldwide.
HMC’s trailing-12-month EBITDA and levered FCF margins of 12.94% and 8.42% are 17.3% and 57.9% higher than the 11.04% and 5.33% industry averages.
On November 7, HMC unveiled its full 24YM lineup at EICMA in Milan, featuring four new models, significant enhancements to four existing ones, and a preview of their upcoming electric vehicle designed for the European market.
For the fiscal second quarter ended September 30, 2023, HMC's sales revenue grew 17.1% year-over-year to ¥4.98 trillion ($32.96 billion). It generated an operating profit of ¥302.13 billion ($2 billion), up 30.7% year-over-year. The company earned profit for the period of ¥270.98 billion ($1.79 billion), up 32.1% from the previous year quarter. Also, its EPS grew 39.4% year-over-year to ¥51.49.
HMC’s revenue and EPS are expected to grow 390.1% and 42.4% year-over-year to $130.63 billion and $4.07 for the fiscal year ending March 2024.
The stock has soared 36.5% over the past year and 40.9% year-to-date to close the last trading session at $32.21.
HMC’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
HMC has an A grade for Stability and a B for Value and Quality. Within the same industry, it is ranked #3.
To see HMC’s additional POWR Ratings for Growth, Momentum, and Sentiment, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BMWYY shares were trading at $34.81 per share on Wednesday morning, up $0.60 (+1.75%). Year-to-date, BMWYY has gained 24.29%, versus a 19.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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