Accelerate Your Portfolio by Investing in These 4 Auto Parts Stocks

NYSE: MGA | Magna International, Inc.  News, Ratings, and Charts

MGA – The global auto parts industry has been banking on the new-vehicle sales slump since last year. With a slow macroeconomic recovery and increased use of old and used cars for personal transportation amid the COVID-19 pandemic, we think auto parts companies Magna International (MGA), LKQ Corporation (LKQ), Gates (GTES), and Modine (MOD) should perform well in the coming months.

The automobile industry was one of the hardest hit industries in 2020, with a 15% decline in auto sales in the U.S.  last year. However, the increasing use of old and used cars for transportation to help with social distancing amid the coronavirus pandemic helped the auto parts industry grow significantly. With lower per-capita income and higher unemployment rates versus pre-pandemic levels, many more people than usual have been extending the lives of their existing automobiles rather than shelling out for a new one. While unemployment rates are declining steadily, they are still above pre-pandemic levels. So, the slow nation’s economic recovery should allow the auto parts industry to record higher gains this year as people delay their plans to upgrade their vehicles.

The global motor vehicle and parts dealers’ market is expected to increase 11% year-over-year to $3.92 trillion in 2021. According to a recent Global Market Insights report, the valuation of the automotive aftermarket industry is expected to cross $1.10 trillion by 2026.

Therefore, we think it wise to invest in auto parts stocks  Magna International, Inc. (MGA), LKQ Corporation (LKQ), Gates Industrial Corporation plc (GTES), and Modine Manufacturing Company (MOD).

Magna International, Inc. (MGA)

Based in Aurora, Canada, MGA is a mobility technology company that is involved in the designing, engineering, supplying and manufacturing of components, systems and modules for original equipment manufacturers (OEMs) of vehicles and light trucks worldwide. The company operates through four segments — Body Exteriors & Structures, Power & Vision, Seating Systems and Complete Vehicles. MGA’s product capabilities include body, exterior, seating, powertrain, active driver assistance, electronics, mirrors and  lighting and roof systems.

Last month, MGA announced  plans to launch new surround-view cameras and electronic control units that provide  high-resolution, 360-degree field of view around the vehicles. The company also announced its new manufacturing facility in St. Clair, Michigan, where battery enclosures are expected to be built for General Motors Company’s (GM) all-new 2022 GMC Hummer EV.

MGA confirmed in January that it is collaborating with Fisker to develop an Advanced Driver Assistance System (ADAS). Moreover, LG Electronics and MGA have announced a joint venture to manufacture e-motors and inverters, among other parts, to support the growing global shift toward vehicle electrification.

The company’s net sales have increased 12.5% year-over-year to $10.57 billion for the fourth quarter, ended December 31, 2020. Sales from the body exteriors & structures segment increased 12% year-over-year to $4.39 billion and sales  from the power & vision segment increased 16.7% year-over-year to $3.18 billion. Its net income came in at $738 million, which represents an improvement of 67.7% year-over-year. Its non-GAAP EPS increased 100.7% year-over-year to $2.83.

A consensus EPS estimate of $1.61 for the current quarter, ending March 31, 2021, represents an improvement of 87.2% year-over-year. Also,  MGA surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $10.18 billion for the quarter ending June 30, 2021 represents a 145.7% gain  on a year-over-year basis.

The stock has gained 87.5% over the past year and closed yesterday’s trading session at $85.92.

MGA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

The stock has a B grade for Value, Momentum, Quality, and Sentiment. We have also graded MGA for Stability and Growth. Click here to access all of MGA’s ratings.

MGA is ranked #9 of 69 stocks in the A-rated Auto Parts industry.

LKQ Corporation (LKQ)

Headquartered in Chicago, Illinois, LKQ is a distributor of vehicle products that include  replacement parts, components and systems used in the repair and maintenance of vehicles, specialty vehicle products and accessories, and automotive glass products. The company operates through three segments — North America, Europe and Specialty. It  distributes bumper covers, automotive-body panels and windshields among other parts.

LKQ’s central distribution center in Berkel en Rodenrijs, Netherlands, whose construction was completed at the end of 2020, is expected to strengthen the company’s European logistics footprint. Its logistic layout, which is being implemented by TGW Systems, is expected to be completed in the second quarter of 2021 after which LKQ Fource is expected to enter the testing phase. Also, LKQ announced on January 13 that it is bringing its two mobile automotive services businesses together under a single brand, known as Elitek Vehicle Services.

The company’s revenue from the specialty segment has increased 17.1% year-over-year to $355.11 million for the fourth quarter, ended December 31, 2020. Its  net income came in at $181.01 million, which represents an improvement of 28.9% year-over-year. LKQ’s operating income increased 29.3% year-over-year to $267.27 million. Its adjusted EPS increased 27.8% year-over-year to $0.69.

A consensus EPS estimate of $0.69 for the quarter ending June 30, 2021 represents an improvement of 30.2% year-over-year. Also,  LKQ surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $3.03 billion for the quarter ending June 30, 2021 represents a 26.2% rise on a year-over-year basis.

The stock has gained 36.3% over the past year and closed yesterday’s trading session at $40.33.

LKQ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

The stock has a B grade for Momentum, Quality and Sentiment. We have also graded LKQ for Stability, Value and Growth. Click here to access all LKQ’s ratings.

LKQ is ranked #12 in the same industry.

Gates Industrial Corporation plc (GTES)

Based in Denver, Colorado, GTES is a manufacturer of power transmission and fluid power solutions. The company operates its business on a product-line basis through its two reporting segments — power transmission and fluid power. GTES  sells its products under its Gates brand name and they are  used in applications across various end markets including construction, agriculture, energy, automotive, transportation, general industrial and consumer products.

GTES  unveiled its all-new PowerGrip GT Extend line of industrial synchronous belts last  December. The product  was initially available for the Asia-Pacific (APAC) region. Another innovative addition to GTES’ industry-leading synchronous belt portfolio, the new PowerGrip GT Extend lineup, is engineered with the latest advanced technology and materials science expertise and is expected to deliver a better solution for an expanded range of industrial applications.

The company’s net sales have increased 9.4% year-over-year to $794.20 million for the fiscal 2020 fourth quarter ended January 2, 2021. Its gross profit came in at $301.80 million, which represents a 15.5% rise on a year-over-year basis. Its net income increased 25.3% year-over-year to $24.30 million, while operating income from continuing operations increased 25.6% year-over-year to $85.40 million. Its adjusted EPS increased 5.3% year-over-year to $0.20.

A consensus EPS estimate of $0.29 for the quarter ending March 31, 2021 represents an improvement of 38.1% year-over-year. Moreover, GTES surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $775.38 million for the quarter ending June 30, 2021 represents a 34.5% rise on a year-over-year basis.

The stock has gained 47.9% over the past year and closed yesterday’s trading session at $15.47.

GTES’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system.

The stock has an A  grade  for Momentum and Sentiment and a B grade for Growth, Value and Quality. We have also graded GTES for Stability. Click here to access all of GTES’ ratings.

GTES is ranked #1 in the same industry.

Modine Manufacturing Company (MOD)

Based in Racine, Wisconsin, MOD specializes in thermal management systems and components, bringing highly engineered heating and cooling technology and solutions to diversified global markets. MOD’s products are used in light, medium and heavy-duty vehicles, heating, ventilation and air conditioning equipment, off-highway and industrial equipment and refrigeration systems. The company operates through three segments — Vehicular Thermal Solutions (VTS), Commercial and Industrial Solutions (CIS) and Building HVAC (BHVAC).

Last December, MOD  announced a new Modine Control System (MCS) option for its  line of Indoor Separated Combustion Heating and Make-Up Air units, which has several benefits including a wide range of damper, supply fan and temperature control strategies to handle a vast array of applications. MOD’s Board of Directors appointed Neil D. Brinker as the company’s President and CEO and a member of its Board of Directors, which was effective December 1, 2020.

The company’s net sales have increased nearly 5% sequentially to $484.30 million for the fiscal 2021 third quarter, ended December 31, 2020. It was driven primarily by favorable currency impacts and higher sales volume in the heavy-duty equipment (HDE) segment. HDE segment sales came in at $185.60 million, up 12.6% year-over-year. Its gross profit came in at $82.70 million, which represents a 12.5% rise on a year-over-year basis. Its adjusted EPS increased 10.8% year-over-year to $0.41.

A  consensus EPS estimate of $0.27 for the quarter ending March 31, 2021 represents an improvement of 12.5% year-over-year. Also, MOD surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $444.83 million for the quarter ending June 30, 2021 represents a 27.9% rise on a year-over-year basis.

The stock has gained 93.8% over the past year and closed yesterday’s trading session at $14.46.

MOD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

The stock has an A  grade of A for Growth and Value and B for Sentiment. We have also graded MOD for Stability, Quality and Momentum. Click here to access all of MOD’s ratings.

MOD is ranked #15 in the same industry.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

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MGA shares were trading at $86.58 per share on Tuesday afternoon, up $0.66 (+0.77%). Year-to-date, MGA has gained 22.29%, versus a 3.78% rise in the benchmark S&P 500 index during the same period.


About the Author: Sweta Vijayan


Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...


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