The auto industry is thriving due to robust demand for new vehicles, improved supply chains, growing popularity of automotive DIY, rising demand for aftermarket parts, growing usage of advanced components, and the transition to electric vehicles (EVs) supported by government incentives.
Before diving deeper into their fundamentals, let’s discuss why the auto industry is well-positioned for growth.
The auto industry is poised for solid growth this year due to easing macroeconomic concerns, availability of sufficient inventory, easing supply chain issues, etc. In October, U.S. new vehicle sales reached 1.21 million units, reflecting a 2% increase over the prior-year period. The growth is fueled by a rising interest in electric vehicles and the country’s improving economy.
In the third quarter, EV sales hit a record, topping 300,000 units in the U.S., with cumulative sales in the first nine months reaching 873,000, suggesting that the milestone of over a million sales can be expected in November. The International Energy Agency predicts a 35% year-over-year increase in EV sales in 2023, totaling 14 million units.
With high vehicle prices and higher borrowing costs, affording new cars will be challenging. This will likely lead potential buyers to keep their existing cars longer, benefiting auto parts suppliers since maintaining an older vehicle is more economical than buying a newer one.
Furthermore, the industry is poised for robust long-term growth due to the increasing demand for automotive customization, the introduction of advanced technologies such as navigation systems and driver assistance systems, and the emergence of e-commerce platforms offering automotive parts. The global automotive aftermarket industry’s revenue is expected to grow at a CAGR of 4% to reach $589.01 billion by 2030.
Moreover, the global auto parts manufacturing market is projected to achieve a 6.3% CAGR and reach $939.21 billion by 2028.
Let’s take a closer look at the fundamentals of the featured stocks.
Continental Aktiengesellschaft (CTTAY)
Headquartered in Hanover, Germany, CTTAY is a technology company that offers intelligent solutions for vehicles, machines, traffic, and transportation worldwide. It operates through four sectors: Automotive, Tires, ContiTech, and Contract Manufacturing.
On November 6, 2023, CTTAY announced leadership in the “DIAZI” project to digitalize automotive component production. The three-year initiative, funded by the German Federal Ministry, involves a consortium of eight partners for fully digitalized production, AI-based data analysis, and continuous optimization.
The project enhances efficiency, flexibility, and cost-effectiveness, contributing to sustainable mobility. Initial successes, including accelerated production of new display solutions, demonstrate progress toward a “digital factory.”
Thomas Ebenhöch, Head of Operations at CTTAY’s User Experience (UX) Division, sees “DIAZI” as a significant move towards digitizing the automotive industry. He emphasized CTTAY’s leading role in innovating efficient and sustainable production processes using digital simulation, AI, and cloud-based data management.
On September 25, 2023, CTTAY announced the delivery of V-shaped displays for Hyundai’s new Kona series, combining instrument cluster and center information display for enhanced driver convenience. The displays support over-the-air software updates and provide a comfortable, ergonomic viewing experience, making controls easily accessible.
Boris Mergell, Head of User Experience (UX) at CTTAY, said, “With the next generation of large display solutions, we demonstrate how we constantly keep pushing to realize a unique user experience for our customers. The display was developed and implemented in less than a year. The implementation in record time was made possible through a close and strong cooperation between Continental and Hyundai.”
In terms of forward EV/Sales, CTTAY’s 0.48x is 58.1% lower than the 1.15x industry average. Its 4.39x forward EV/EBITDA is 54.5% lower than the 9.65x industry average. Likewise, its 8.10x forward EV/EBIT is 39.3% lower than the 13.34x industry average.
CTTAY’s sales for the nine months that ended September 30, 2023, increased 6.4% year-over-year to €30.97 billion ($33.84 billion). Its adjusted EBIT rose 20.3% over the prior-year period to €1.71 billion ($1.87 billion).
The company’s net income attributable to the shareholders of its parent and EPS came in at €889.40 million ($971.99 million) and €4.45, compared to a net loss and loss per share of €222 million ($242.62 million) and €1.11, respectively, during the same period last year.
Street expects CTTAY’s revenue for the quarter ending December 31, 2023, to increase 7.5% year-over-year to $11.67 billion. Its EPS for fiscal 2023 is expected to increase significantly year-over-year to $0.67. Over the past year, the stock has gained 28.8% to close the last trading session at $7.51.
CTTAY’s POWR Ratings reflect its solid prospects. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Stability and a B for Quality. Within the A-rated Auto Parts industry, it is ranked #13 out of 61 stocks. In total, we rate CTTAY on eight different levels. Beyond what we stated above, we also have given CTTAY grades for Growth, Momentum, and Sentiment. Get all the CTTAY ratings here.
Mazda Motor Corporation (MZDAY)
Headquartered in Hiroshima, Japan, MZDAY manufactures and sells passenger cars and commercial vehicles in Japan, China, North America, Europe, and internationally.
In terms of forward Price/Sales, MZDAY’s 0.23x is 72.7% lower than the 0.84x industry average. Its 3.45x forward EV/EBIT is 74.1% lower than the 13.34x industry average. Likewise, its 0.19x forward EV/Sales is 83.9% lower than the 1.15x industry average.
For the second quarter that ended September 30, 2023, MZDAY’s net sales increased 41.1% year-over-year to ¥2.32 trillion ($15.60 billion). Its operating income rose 134.6% over the prior-year quarter to ¥129.61 billion ($871.78 million).
For the same quarter, the company’s net income attributable to owners of the parent and net income per share stood at ¥108.13 billion ($727.29 million) and ¥171.49, up 25.9% and 25.9%, year-over-year, respectively.
For the quarter ending March 31, 2024, MZDAY’s revenue is expected to increase 3.1% year-over-year to $8.59 billion. The stock has gained 49.2% year-to-date to close the last trading session at $5.61.
MZDAY’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Stability and Quality. It is ranked first out of 52 stocks in the Auto & Vehicle Manufacturers industry. To access MZDAY’s Growth, Momentum, and Sentiment ratings, click here.
Blue Bird Corporation (BLBD)
BLBD designs, engineers, manufactures and sells school buses and related parts in the United States, Canada, and internationally. It operates through two segments: Bus and Parts.
On October 24, 2023, BLBD achieved a milestone by delivering its 1,500th electric, zero-emission school bus to Modesto City Schools in California. The delivery marks an industry-leading achievement, supporting Modesto’s transition to clean student transportation and reducing its carbon footprint.
The company recently inaugurated its Electric Vehicle Build-up Center to enhance production capacity to 5,000 electric school buses annually.
On October 17, 2023, BLBD commends New York Bus Sales for opening a new 20,000-square-foot dealership in Batavia, NY. The facility meets the rising demand for electric and low-emission school buses, offering a range from traditional diesel to zero-emission options. The dealership provides sales, service, maintenance, and parts support, anticipating increased demand for clean student transportation in the state.
Tim Gordon, VP of Sales and Marketing at BLBD, said, “More and more school districts adopt low- and zero-emission school buses. For nearly a century, Blue Bird has provided reliable student transportation. We are confident that the first-rate dealership staff at New York Bus Sales will continue to provide excellent service to Blue Bird and Micro Bird customers, thereby maximizing vehicle uptime and performance.”
In terms of forward non-GAAP PEG, BLBD’s 1.43x is 11.9% lower than the 1.62x industry average. Its 0.61x forward EV/Sales is 64.2% lower than the 1.71x industry average. Likewise, its 14.35x forward EV/EBIT is 6.3% lower than the 15.31x industry average.
BLBD’s net sales for the fiscal third quarter ended July 1, 2023, increased 42.8% year-over-year to $294.28 million. Its non-GAAP net income came in at $14.49 million, compared to a non-GAAP net loss of $2.87 million in the year-ago quarter.
The company’s non-GAAP EPS came in at $0.44, compared to a non-GAAP loss per share of $0.09 in the year-ago quarter. In addition, its adjusted EBITDA rose 218.6% year-over-year to $28.02 million.
For the quarter ended September 30, 2023, BLBD’s revenue is expected to increase 12.6% year-over-year to $290.11 million. Its EPS for the quarter ending March 31, 2024, is expected to increase 16.4% year-over-year to $0.31. It surpassed the Street EPS estimates in three of the trailing four quarters. The stock has gained 74% year-to-date to close the last trading session at $18.64.
BLBD’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Sentiment and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #14. To see BLBD’s Value, Momentum, and Stability ratings, click here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
Want More Great Investing Ideas?
CTTAY shares were trading at $7.40 per share on Tuesday afternoon, down $0.12 (-1.53%). Year-to-date, CTTAY has gained 26.00%, versus a 19.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|CTTAY||Get Rating||Get Rating||Get Rating|
|MZDAY||Get Rating||Get Rating||Get Rating|
|BLBD||Get Rating||Get Rating||Get Rating|