Over the past year, the automotive industry has faced challenges such as shortages of chips, high inflation, and rising interest rates. Total new vehicle sales in the United States declined 8% year-over-year in 2022, registering its worst performance in over a decade.
However, the sale of electric vehicles (EVs) rose 65% year-over-year, increasing almost two-thirds compared to 2021. In 2022, EVs accounted for 5.8% of all new car sales in the United States, up from 3.1% in 2021. With more manufacturers launching EVs, the automotive industry is expected to witness strong demand in the long term.
Additionally, car manufacturers are expected to benefit from the CHIPS and Science Act as it is anticipated to enhance their production capabilities by reducing their dependence on foreign chip suppliers.
According to S&P Global Mobility, U.S. new vehicle sales in 2023 are expected to be 14.80 million, while Cox Automotive forecasts sales of 14.10 million units, coming in higher than the 13.90 million units sold last year.
Toyota Motor North America’s executive VP Jack Hollis said, “We’re cautiously optimistic about the future. In 2023, there will be an uptick not quite as high as we would love it to be but going in the right direction.”
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
In terms of forward non-GAAP P/E, GM’s 5.10x is 65.1% lower than the 14.59x industry average. Likewise, its 10.46x forward EV/EBIT is 22.4% lower than the 13.49x industry average.
On November 17, 2022, Vale Canada Limited, a subsidiary of Vale S.A. (VALE), and GM announced they had signed a term sheet for the long-term supply of battery-grade nickel sulfate from VALE’s proposed plant at Bécancour, Québec, Canada.
GM executive vice president of Global Product Development, Purchasing, and Supply Chain, Doug Parks, believes this new agreement with VALE reinforces GM’s leadership in building a secure and sustainable North American EV supply chain and should provide GM with a significant supply of high-grade nickel sulfate from a low-carbon source.
On January 20, 2023, GM announced its plans to invest $918 million in four U.S. manufacturing sites, including $854 million to prepare these facilities to produce the company’s sixth generation Small Block V-8 engine and an additional $64 million in Rochester, New York and Defiance, Ohio for castings and components to support EV production.
These investments are expected to enable the company to strengthen its full-size truck and SUV business and continue supporting its growing EV product portfolio.
For the fiscal third quarter that ended September 30, 2022, GM’s net sales and revenue increased 56.4% year-over-year to $41.89 billion. Its adjusted net earnings increased 47.5% year-over-year to $3.28 billion. In addition, its adjusted EPS came in at $2.25, representing a 48% increase from the year-ago quarter.
GM’s EPS and revenue for the quarter that ended December 31, 2022, are expected to increase 23.7% and 21.2% year-over-year to $1.67 and $40.72 billion, respectively. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 7.7% over the past month to close the last trading session at $36.44.
GM’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Auto & Vehicle Manufacturers industry, it is ranked #18 out of 64 stocks. It has an A grade for Growth and a B for Value.
Click here to see the additional POWR Ratings of GM for Momentum, Stability, Sentiment, and Quality.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
In terms of forward P/E, HMC’s 10.21x is 35.6% lower than the 15.86x industry average. Likewise, its 10.54x forward EV/EBIT is 21.9% lower than the 13.49x industry average.
On January 13, 2023, LG Energy Solution and HMC announced a joint venture to produce lithium-ion batteries for EVs produced by HMC. The joint venture is a major step toward an electrified future, and the two companies have committed to creating 2,200 jobs to establish the new production facility.
HMC’s sales revenue for the second quarter (ended September 30, 2022) increased 25% year-over-year to ¥4.26 trillion ($32.73 billion). The company’s operating profit increased 16.2% year-over-year to ¥231.24 billion ($1.77 billion).
Its profit for the period attributable to owners of the parent increased 13.6% year-over-year to ¥189.30 billion ($1.46 billion). Additionally, its EPS attributable to owners of the parent increased 14.8% from the prior-year period to ¥110.85.
Analysts expect HMC’s revenue for the quarter that ended December 31, 2022, to increase 10.2% year-over-year to $35.19 billion. Its EPS for the fiscal year 2024 is expected to increase 21.8% year-over-year to $2.88. The stock has gained 9.8% over the past three months to close the last trading session at $24.16.
It is no surprise that HMC has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It is ranked #7 in the same industry. In addition, it has an A grade for Value and a B for Stability and Quality.
To see HMC’s rating for Growth, Momentum, and Sentiment, click here.
Subaru Corporation (FUJHY)
Headquartered in Tokyo, Japan, FUJHY manufactures and sells automobiles and aerospace products worldwide. It operates through three segments: Automotive; Aerospace; and Others.
In terms of forward P/E, FUJHY’s 6.92x is 56.3% lower than the 15.86x industry average. Likewise, its 1.86x forward EV/EBIT is 86.2% lower than the 13.49x industry average.
FUJHY’s revenue for the six months ended September 30, 2022, increased 30.5% year-over-year to ¥1.75 trillion ($13.45 billion). The company’s gross profit increased 28.9% year-over-year to ¥331.10 billion ($2.54 billion).
Its operating profit increased 102.8% year-over-year to ¥110.45 billion ($848.61 million). Additionally, its profit for the period increased 71.6% from the prior-year period to ¥77.67 billion ($596.81 million).
FUJHY’s revenue for the quarter that ended December 31, 2022, is expected to increase 37.4% year-over-year to $7.95 billion. Its EPS for the fiscal year 2023 is expected to increase 218% year-over-year to $1.13. The stock has gained 5.2% over the past nine months to close the last trading session at $7.84.
FUJHY’s POWR Ratings reflect this positive outlook. FUJHY has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked #6 in the Auto & Vehicle Manufacturers industry. It has an A grade for Growth and Value and a B for Stability and Quality.
We have also given FUJHY grades for Momentum and Sentiment. Get all FUJHY ratings here.
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GM shares were trading at $36.31 per share on Tuesday afternoon, down $0.13 (-0.36%). Year-to-date, GM has gained 7.94%, versus a 4.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions. More...
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