With rising inflation and a shortage of critical components—such as semiconductor chips—automobile prices are predicted to remain high in 2022. Furthermore, trends such as increased electric car manufacturing, an increase in digital automotive sales, the inclusion of creative marketing methods, and other measures, are predicted to drive the auto industry’s growth in 2022. According to analysts, the easing of supply chain disruptions will also result in an increase in new car sales this year.
Popular auto manufacturer Ford Motor Company (F) garnered significant investor attention after the launch of its new electric cars, as evidenced by its shares’ 99.4% gains over the past year. However, its total revenues decreased 5.1% year-over-year to $35.68 billion, and the company's net income declined 23.6% from its year-ago value to $1.82 billion in its last reported quarter. Furthermore, the stock dipped after Jefferies analyst Philippe Houchois downgraded it to Hold from Buy on Wednesday. The stock has declined 14.1% in price over the past five trading days. So, the stock’s near-term prospects look bleak.
In contrast, auto stocks Volkswagen AG (VWAGY), Honda Motor Co., Ltd. (HMC), and Subaru Corporation (FUJHY) are well-positioned to outperform Ford this year by capitalizing on the industry tailwinds. So, we think these stocks could be better picks now.
Volkswagen AG (VWAGY)
Based in Wolfsburg, Germany, VWAGY is a global automobile manufacturing company. Passenger Cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services are the company’s operational segments. Its brand portfolio includes Volkswagen, Audi, SEAT, SKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania, and MAN.
Last month, VWAGY established a European company to consolidate its activities along the value chain for batteries. VWAGY should be able to offer its customers powerful, inexpensive, and sustainable vehicle batteries with this new establishment.
VWAGY's sales revenue increased 20% year-over-year to €186.6 billion ($211.58 billion) in the nine months ended Sept. 30, 2021. The company's gross result grew 44.7% from its year-ago value to €33.77 billion ($38.29 billion). Its operating result rose 724.1% from the prior-year quarter to €13.95 billion ($15.82 billion).
Analysts expect VWAGY's revenue for its fiscal 2022 to be $307.66 billion, representing 8.7% growth year-over-year. The company's EPS is estimated to grow 66.8% in its fiscal 2021 and 12.3% in fiscal 2022. The stock has gained 43.6% in price over the past year.
VWAGY's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Value and Stability. We have also graded VWAGY for Momentum, Quality, Sentiment, and Growth. Click here to access all VWAGY's ratings. VWAGY is ranked #9 of 69 stocks in the Auto & Vehicle Manufacturers industry.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC is an automobile manufacturer and distributor that operates through a Motorcycle Business; Automobile Business; Financial Services Business and Life creation, and other business segments. The company markets and sells its products in Japan, North America, Europe, Asia, and internationally.
Last month, HMC invested in Helm.ai, an AI startup company in the U.S. Through this investment, HMC should be able to strengthen its value creation in intelligence in mobility and produce quick results. Also, the move should further strengthen the relationship between the two companies and accelerate their research and development of unique solutions.
During its fiscal second quarter, ended Sept. 30, 2021, HMC's sales revenue came in at ¥3.4 trillion ($29.8 billion). The company's operating profit amounted to ¥198.9 billion ($1.74 billion).
HMC's consensus revenue is expected to increase 7.7% year-over-year to $35.69 billion in its fiscal period ending March 2022. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Furthermore, its EPS is expected to increase 15.2% per annum in the next five years. The stock has climbed 7.7% in price over the past month.
HMC's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Value and a B grade for Sentiment and Stability.
In addition to the POWR Rating grades I've just highlighted, one can see HMC's ratings for Growth, Quality, and Momentum here. The stock is ranked #5 in the Auto & Vehicle Manufacturers industry.
Subaru Corporation (FUJHY)
Headquartered in Tokyo, Japan, FUJHY is a global manufacturer and distributor of automobiles and aerospace products. The company operates through three segments—Automotive Business Unit; Aerospace Company; and Other Businesses. FUJHY also provides shipping, land freight, warehousing of vehicles, and other operational services.
FUJHY's revenue increased 10.1% year-over-year to ¥1.34 trillion ($11.74 billion) for its fiscal second-quarter, ending March 2022. The company's operating income rose 78.1% from its year-ago value to ¥54.5 billion ($477.06 million).
For its fiscal period ending March 2022, FUJHY's consensus revenue is expected to be $7.89 billion, representing a 13.5% year-over-year increase. Its EPS is expected to increase 7% per annum over the next five years. The stock has advanced 3.5% in price over the past month.
It is no surprise that FUJHY has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Value and a B grade for Stability and Quality.
Click here to see the additional POWR Ratings for FUJHY (Sentiment, Growth, and Momentum). FUJHY is ranked #11 in the Auto & Vehicle Manufacturers industry.
VWAGY shares were trading at $29.08 per share on Friday afternoon, down $0.99 (-3.28%). Year-to-date, VWAGY has declined -0.41%, versus a -7.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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