The automobile industry had saw huge demand for personal vehicles last year as consumers sought to take COVID-19 precautions. Also, growing interest in electric vehicles (EVs), with widespread, governmental policy support, contributed significantly to the industry’s performance. While EVs’ long-term prospects look bright, with most countries globally seeking to address climate change concerns over the next decade, the global automotive industry could struggle to grow this year. Global automobile sales are expected to be less than 70 million this year, and the largest producer and seller China is expected to witness a 1.4% decline in sales.
Along with this bleak outlook, investors’ rotation away from overvalued automotive (primarily EV) stocks to quality cyclical stocks is leading to a sell-off. This is evident in the First Trust NASDAQ Global Auto Index Fund’s (CARZ) 0.2% decline over the past three months.
However, Toyota Motor Corporation (TM), Volkswagen AG (VWAGY), and Daimler AG (DDAIF) have been maintaining strong momentum since last year. And we believe these three stocks have the potential to continue doing do in the coming months. Therefore, it could be wise to invest in these stocks now.
Click here to check out our Automotive Industry Report for 2021
Toyota Motor Corporation (TM)
TM manufactures and sells motor vehicles and related parts and accessories. The company operates through three segments—Automobile, Finance and All Other. It provides robots, basic research projects, marine and agribio business. In addition, the company operates GAZOO.com, a web portal for automobile information.
On April 21, Chevron Corporation (CVX) and TM North America announced a memorandum of understanding to explore a strategic alliance for the development of commercially viable, large-scale businesses in hydrogen. With TM’s experience in developing hydrogen-powered fuel cell electric technology and CVX’s deep resources in the energy sector, these companies hope to create new transportation (and transportation fuel) choices for consumers and businesses.
On April 18, TM debuted the Toyota bZ4X Concept, a vision for the first of a global series of battery-electric vehicles that will be introduced under the Toyota bZ brand umbrella. TM plans to expand to around 70 electrified models globally by 2025. In addition, Toyota intends to bring electrification to its pickup truck lineup soon, including hybrid and BEV powertrains. Both developments would contribute to meeting TM’s goal of carbon neutrality by 2050.
TM’s total sales revenues increased 7.1% year-over-year to ¥8.15 trillion for the fiscal year 2021 third quarter, ended December 31, 2020. The company’s operating income was ¥987.94 billion, which represents a 54.3% rise from the prior-year period. TM’s net income came in at ¥867.51 billion, up 48% from the prior-year period. TM’s EPS increased 49.1% year-over-year to ¥296.25.
A $16.68 consensus EPS estimate for the fiscal year ending March 2022 represents a rise of 13% year-over-year. TM surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $68.20 billion for the current quarter, ending June 30, 2021, represents a 56.5% gain on a year-over-year basis. The stock has gained 27.4% over the past year and 23.1% over the past nine months. It closed Friday’s trading session at $154.99.
TM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, 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.
The stock has an A grade for Value, and a B grade for Momentum, Growth, and Stability. We have also graded TM for Value and Quality. Click here to access all TM’s ratings.
TM is ranked #20 of 53 stocks in the B-rated Auto & Vehicle Manufacturers industry.
Volkswagen AG (VWAGY)
VWAGY is a Germany-based company that manufactures and sells vehicles. The company operates through four segments: Passenger Cars, Commercial vehicles, Power Engineering, and Financial Services. It offers economy and luxury automobiles, sports cars, trucks and commercial vehicles.
On April 26,VWAGY, along with 24 partners in Catena-X Automotive Network, announced the creation of uniformed standards for the exchange of data in the automotive value chain. As a founding member, VWAGY hopes the network will serve as the base for a digital ecosystem in the automotive industry, and that the data exchange will result in new opportunities for increased efficiency and transparency in production and supply chain.
VWAGY debuted its new and compact Polo model on April 22. VWAGY has introduced several updates in Polo that were previously available only in higher vehicle classes. VWAGY has also introduced partly automated driving in the form of Volkswagen’s new IQ.DRIVE Travel Assist.
VWAGY is scheduled to release its fiscal 2021 first quarter results on May 6. For the fourth quarter, ended December 31, 2020, VWAGY’s total assets were €497.11 billion, which represented an improvement of 1.9% year-over-year. The company’s cost of sales had decreased 9.6% year-over-year to €183.94 billion. And its cash flows from operating activities were €24.90 billion, up 27.8% year-over-year.
For the fiscal year, ending December 2021, analysts expect VWAGY’s EPS to be $6.17, representing a 207.3% improvement year-over-year. Analysts expect the stock’s revenue to be $70.16 billion for the fiscal year 2021 second quarter, ending June 30, 2021, up 44.3% from the prior-year period. VWAGY has gained 146% over the past year and 96.8% over the past nine months. It closed Friday’s trading session at $34.20.
It’s no surprise that VWAGY has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Growth, and a B grade for Momentum, Value, and Sentiment. Click here to see the additional ratings for VWAGY (Stability and Quality).
VWAGY is ranked #3 in the same industry.
Daimler AG (DDAIF)
DDAIF is an automotive engineering company that develops, produces and distributes cars, trucks and vans. The company operates through five segments—Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services. It also sells related spare parts and accessories.
DDAIF’s Mercedes-Benz Vans plans to unveil its new Concept EQT in an extensive Media Special on the Mercedes media platform on May 10. This concept vehicle offers a glimpse of the electric version of its forthcoming T-Class in the small-van segment. With a spacious and variable interior with attractive design, DDAIF hopes the vehicle will attract families and leisure-active private customers.
On April 20, Mercedes-Benz’s first eCitaro G articulated buses were delivered to Hanover’s transport operator, ÜSTRA. Mercedes-Benz has introduced powerful lithium-ion batteries in these buses that will provide emission-free and long battery life. With this, DDAIF has advanced toward its goal of electrifying bus transport in Lower Saxony’s capital.
For its fiscal year 2021 first quarter, ended March 31, 2021, the company’s sales increased 13.1% year-over-year to 728,609 units. Its Mercedes-Benz Cars & Vans’ unit sales increased 14.7% year-over-year to 627,287 units. DDAIF’s revenue came in at €41.02 billion for the quarter, which represents a 10.2% improvement from its prior-year period. The company’s net profit was €4.37 billion, up 2503% year-over-year. Also, its EPS has increased 4355.6% year-over-year to €4.01.
Analysts expect DDAIF’s EPS to improve 267.4% year-over-year to $3.70 for the current quarter, ending June 30, 2021. It surpassed the Street’s EPS estimates in three of the trailing four quarters. And its $50.65 billion consensus revenue estimate for the current quarter represents a 52.5% rise on a year-over-year basis.
The stock has gained 192.3% over the past year and 90.2% over the past nine months. It closed Friday’s trading session at $88.95.
DDAIF’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock also has an A grade for Growth, and a B grade for Momentum, Value, and Stability. Click here to see the additional POWR Ratings for DDAIF (Sentiment and Quality).
DDAIF is ranked #2 in the same industry.
Click here to check out our Automotive Industry Report for 2021
TM shares were unchanged in after-hours trading Monday. Year-to-date, TM has declined -0.67%, versus a 12.06% 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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