The electric car juggernaut Tesla, Inc. (TSLA) completed 2020 by delivering robust performance in the face of unforeseen global challenges by rapidly expanding its manufacturing capabilities. However, the stock has lost 7.5% over the past month. It has been struggling to keep pace with its strong competitors who are making deeper forays into the electric vehicle (EV) space, while trading at relatively lower valuations.
TSLA missed earnings estimates in the last reported quarter. Its adjusted earnings per share for the fourth quarter 2020 came in at $0.80, falling short of the consensus estimate by 22.3%. This, along with its stretched valuation, could result in further price decline for the stock in the near term.
In contrast, General Motors Company (GM), Tata Motors Limited (TTM), and Mazda Motor Corporation (MZDAY) look poised to outperform with their strong long-term earnings prospects and reasonable valuations.
General Motors Company (GM)
Headquartered in Detroit, Michigan, GM designs and sells trucks, crossovers, and automobile parts worldwide. It operates through the following segments: GM North America, GM International, Cruise, and GM Financial. In addition, it provides connected services that comprise mobile applications for electric vehicle owners to locate charging stations.
This month, GM collaborated with OneH2, and Navistar, Inc. to introduce a hydrogen truck ecosystem with hydrogen fuel cell technology. Because hydrogen is the future of zero-emission renewable energy in the heavy truck market, this partnership could help GM advance in a zero-emission long-haul transportation system and stand out in the market.
In January, GM and Cruise teamed with Microsoft (MSFT) to accelerate the commercialization of self-driving vehicles. This should help GM realize even more benefits from cloud computing as it launches 30 new electric vehicles globally by 2025 and creates new businesses and services to drive growth.
GM’s net sales and revenue under GMNA segment has increased 32.9% year-over-year to $30.17 billion in the fourth quarter, ended December 31, 2020. Its net automotive cash provided by operating activities rose 581.8% from its year-ago value to $5.24 billion. The company reported net income of $2.85 billion, compared to a net loss of $194 million in the prior-year quarter.
A consensus EPS estimate of $0.97 for the current quarter ending March 31, 2021 represents a 56.5% increase year-over-year. Also, GM has an impressive earnings surprise history; the company beat the Street’s EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $33.5 billion for the current quarter represents a 2.4% increase from the same period last year. The stock has gained 50.5% over the past year.
In terms of its forward non-GAAP p/e ratio, GM is currently trading at 10.09x, which is significantly lower than TSLA’s 186.41x.
GM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
GM has a B grade for Growth and Value. Of the 52 stocks in the C-rated Auto & Vehicle Manufacturers industry, GM is ranked #18.
In total, we rate GM on eight different levels. Beyond what we stated above we also have given GM grades for Stability, Sentiment, Momentum, and Quality. Get all the GM ratings here.
Note that GM is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Tata Motors Limited (TTM)
TTM is a designer, manufacturer, and seller of passenger cars, sports utility vehicles, small commercial vehicles and pickup trucks, buses, and heavy commercial vehicles. It operates in India, China, the United States, Europe, and internationally and sells its products under the brand names – Tata, Daewoo, Fiat, Jaguar, and Land Rover.
Jaguar Land Rover, the luxury automotive brand owned by TTM, recently introduced its “Reimagine” strategy, which will culminate in the brand becoming an all-electric offering by 2025, with the first all-electric Land Rover model set to debut in 2024. This will create a new benchmark in the global automotive industry that should help the company realize its potential and reinforce the brand’s appeal to its customers.
TTM’s revenue has increased 5.5% year-over-year to ₹75.65K crores in the third quarter, ended December 31, 2020. Its EBITDA rose 540 basis points to 14.8%, while its EBIT rose 450 basis points to 6.4%. The company’s JLR segment sales grew 13.1% sequentially to 128,469 vehicles, and TTM reported a positive free cash flow of ₹2.2K crores under the TML segment.
Analysts expect its EPS to grow at a rate of 6.9% per annum over the next five years. Also, the stock has gained 92.7% over the past year.
In terms of forward ev/sales ratio, TTM is currently trading at 0.73x, which is much lower than TSLA’s 15.48x.
It is no surprise that TTM has an overall rating of B, which translates to a Buy in our POWR Ratings system. TTM has an A grade for Sentiment, and a B grade for Growth and Value. In the same industry, it is ranked #10.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the TTM ratings for Stability, Quality, and Momentum here.
Mazda Motor Corporation (MZDAY)
Headquartered in Hiroshima, Japan, MZDAY is the manufacturer and seller of passenger cars and commercial vehicles in Japan, North America, Europe, China, and internationally. The company’s primary products include four-wheeled vehicles, gasoline engines, diesel engines, and automatic and manual transmissions for vehicles.
MZDAY’s ordinary income has increased 38.3% year-over-year to ¥22.17 billion in the third quarter, ended December 31, 2020. Its gross profit rose 2% from the year-ago value to ¥176.31 billion, while its cash and cash equivalent increased 31.3% from the end of the previous fiscal year to ¥745.6 billion. The company’s extraordinary income rose 152.65 year-over-year to ¥384 million.
A consensus revenue estimate of $27 billion for the current quarter, ending March 31, 2021, represents a 12.2% increase from the same period last year. The stock has gained 2.8% over the past year.
In terms of forward ev/sales ratio, MZDAY is currently trading at 0.26x, which is much lower than TSLA’s 15.48x.
MZDAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our POWR Ratings system. MZDAY has a B grade for both Value and Stability. It is ranked #12 among the 52 stocks in the Auto & Vehicle Manufacturers industry.
Click here to see the additional POWR Ratings for MZDAY (Sentiment, Growth, Momentum and Quality).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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GM shares were trading at $52.45 per share on Monday morning, down $0.12 (-0.23%). Year-to-date, GM has gained 25.96%, versus a 3.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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