The auto industry has evolved over the past decade and is undergoing massive ground-breaking transformations, including the EV revolution. Despite the adverse effects of the pandemic and a global semiconductor shortage, worldwide car sales grew to around 66.70 million in 2021, up from 63.80 million units in 2020.
Furthermore, new vehicle prices are soaring, fueled by pent-up consumer demand, low vehicle inventories, and rising sales of luxury vehicles. Additionally, hefty investments in R&D, technological innovations to make smart cars, and supportive government initiatives are boosting the sector’s prospects. The global automotive industry is expected to grow at a CAGR of 3.7% from 2020-2030.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and others. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
On July 14, Kyndryl (KD), the world’s largest IT infrastructure service provider, announced a multi-year agreement with HMC to support its infrastructure transformation across U.S. manufacturing plants, research and development, captive finance, and sales operations. This collaboration is expected to help HMC harness data and bring more innovation to its customers.
HMC’s sales revenue increased 10.5% from the prior year to ¥14.55 trillion ($0.11 billion) in the fiscal year ended March 31, 2022. Operating profit came in at ¥871.23 billion ($6.38 billion), reflecting an increase of 32% year-over-year, while its EPS came in at ¥411.09, up 8% year-over-year.
Analysts expect HMC’s revenue for the fiscal year ending March 2023 to come in at $120.44 billion, indicating an increase of 350.9% year-over-year. The company’s EPS is expected to grow 26.6% year-over-year to $3.47 in the same period. It has an impressive earnings surprise history, as it topped Street EPS estimates in three of the trailing four quarters.
In terms of its forward EV/Sales, HMC is currently trading at 0.65x, 39.8% lower than the industry average of 1.09x. Its forward EV/EBITDA multiple of 7.89 is 4.4% lower than the industry average of 8.26.
HMC’s stock has slumped 11.2% year-to-date to close the last trading session at $25.27.
HMC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HMC also has an A grade in Value and a B in Quality, Sentiment, and Stability. It is ranked #1 of 64 stocks in the Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we’ve also rated HMC for Momentum and Growth. Get all the HMC ratings here.
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA is engaged in designing, engineering, manufacturing, distribution, and selling automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems worldwide.
On June 24, STLA announced a €50 million equity investment in Vulcan Energy Resources Ltd towards its production expansion drilling in the Upper Rhine Valley Brine Field.
“Making this highly strategic investment in a leading lithium company will help us create a resilient and sustainable value chain for our European electric vehicle battery production,” said Carlos Tavares, STLA CEO.
For the fiscal year ended December 2021, STLA’s net revenues increased 13.6% year-over-year to €152.12 billion ($154.67 billion). Its operating income grew 105.7% from the year-ago value to €15.30 billion ($15.56 billion). Net profit stood at €14.34 billion ($14.58 billion), reflecting a 220.5% increase year-over-year.
Street expects STLA’s revenue for the fiscal quarter ending September 2022 to come in at $42.61 billion, indicating an 11.9% year-over-year increase. Moreover, its revenue is expected to improve marginally year-over-year to $172.70 billion in the ongoing fiscal year.
In terms of its forward EV/Sales, STLA is currently trading at 0.14x, 87.2% lower than the industry average of 1.09x. Its forward Price/Sales multiple of 0.23 is 73% lower than the industry average of 0.87.
STLA’s shares declined 31.5% year-to-date to close the last trading session at $13.02.
It’s no surprise that the stock has an overall rating of B, equating to Buy in our POWR Ratings system.
The company has an A grade in Value and a B in Stability and Sentiment. The stock is ranked #9 in the same industry. Click here to get STLA’s ratings for Growth, Quality, and Momentum.
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HMC shares were trading at $25.20 per share on Wednesday afternoon, down $0.07 (-0.28%). Year-to-date, HMC has declined -10.17%, versus a -15.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...
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