With a growing emphasis on reducing carbon footprints, the automotive industry's commitment to producing electric and hybrid vehicles aligns with broader environmental goals, fostering positive industry dynamics. At the same time, the aerospace industry seems to be on the verge of unprecedented growth.
Against the backdrop, in this article, we explore the fundamentals of three stocks: PACCAR Inc (PCAR), Rolls-Royce Holdings plc (RYCEY), and Commercial Vehicle Group, Inc. (CVGI).
In October, the United States witnessed a year-over-year increase of 2% in new vehicle sales, totaling 1,211,141 units. This upswing could be attributed to a growing demand for Electric Vehicles (EVs).
Given the rising demand for EVs, it comes as no surprise that in the third quarter, sales volumes of EVs achieved yet another milestone, surpassing 300,000 units for the first time in the U.S. market.
In the U.S. market alone, revenue generated from EV sales is projected to experience a substantial upswing, reaching approximately $70.10 billion by 2023, exhibiting a robust CAGR of 18.2% spanning 2023 to 2028.
Moreover, with growing urbanization, the automotive industry is projected to reach $6.07 trillion, expanding with a CAGR of 6.9% by 2030.
Simultaneously, the aerospace vehicles market is constantly evolving with significant technological advancements. As a result, the global aerospace parts manufacturing market is projected to reach $1.94 trillion by 2031, growing at a CAGR of 9.2% from 2022 to 2031.
In light of such encouraging industry prospects, investors may find potential opportunities in fundamentally strong stocks. With that being said, let us delve deeper into the featured Auto & Vehicle Manufacturers stocks in detail, beginning with number three.
Stock #3: PACCAR Inc (PCAR)
PCAR designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Europe, Mexico, South America, Australia, and internationally. It operates through three segments: Truck; Parts; and Financial Services.
On September 12, PCAR declared a quarterly dividend of $0.27 per share, payable to its shareholders on December 6, 2023. The company’s annual dividend of $1.08 translates to a 1.18% yield on the prevailing prices, while its four-year average dividend yield is 3.58%. Its dividend has grown at CAGRs of 6.8% and 7.4% over the past three and five years, respectively.
In the same month, PCAR partnered with Accelera, the zero-emissions division of Cummins Inc and Daimler Trucks & Buses US Holding LLC to expedite and localize the production of battery cells and the battery supply chain in the United States.
The collaborative effort aims to establish a joint venture dedicated to manufacturing battery cells for electric commercial vehicles and industrial applications, contributing to the growth of the clean technology sector and generating valuable manufacturing jobs in the United States.
For the fiscal third quarter that ended on September 30, 2023, PCAR’s net sales and revenues from the Truck, Parts and Other segment increased 23.1% year-over-year to $8.23 billion, while its revenues from the Financial Services segment grew 24.8% from the year-ago value to $464.10 million.
In addition, the company’s net income and net income per share improved 59.7% and 59.2% from the prior-year quarter to $1.23 billion and $2.34, respectively.
The consensus revenue estimate of $8.35 billion for the fourth quarter (ending December 2023) reflects a 7.9% increase year-over-year. The consensus EPS estimate of $2.20 for the same quarter indicates a 25.1% year-over-year improvement.
Moreover, the company surpassed the EPS and revenue estimates in each of the trailing four quarters, which is excellent.
PCAR’s shares have surged 39.3% year-to-date and 28% over the past six months to close the last trading session at $91.84.
PCAR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Sentiment, and Quality. In the 52-stock B-rated Auto & Vehicle Manufacturers industry, it is ranked #16. Click here to see PCAR’s ratings for Value, Momentum, and Stability.
Stock #2: Rolls-Royce Holdings plc (RYCEY)
Headquartered in London, the United Kingdom, RYCEY operates as an industrial technology company in the United Kingdom and internationally. The company operates in four segments: Civil Aerospace; Defence; Power Systems; and New Markets.
On October 18, RYCEY announced the successful conclusion of a series of tests utilizing 100% Sustainable Aviation Fuel (SAF) on its latest business aviation engines, the Pearl 15 and the Pearl 10X. Carried out at the company's Business Aviation headquarters in Dahlewitz, Germany, these tests underscore RYCEY’s ongoing dedication to playing a key role in the pursuit of achieving net-zero flight by 2050.
For the six-month period, which ended on June 30, 2023, RYCEY’s revenue rose 34.3% from the year-ago value to £7.52 billion ($9.39 billion), while its gross profit increased 56% year-over-year to £1.66 billion ($2.07 billion).
Moreover, the company’s profit for the period and EPS came in at £1.23 billion ($1.54 billion) and 14.70p versus a loss for the period and loss per share of £1.55 billion ($1.94 billion) and 19.29p, respectively.
Street expects RYCEY’s revenue for the fiscal period ending December 2023 to increase 20.2% year-over-year. While its EPS for the same period is projected to improve significantly year-over-year to $0.10.
Over the past year, the stock has soared 197% to close the last trading session at $3.
RYCEY strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Growth, Value, Momentum, and Stability. Within the same B-rated industry, it is ranked #13. Click here to see the other ratings of RYCEY for Sentiment and Quality.
Stock #1: Commercial Vehicle Group, Inc. (CVGI)
CVGI designs, manufactures, produces, and sells components and assemblies in North America, Europe, and the Asia-Pacific regions. The company operates in four segments: Vehicle Solutions; Electrical Systems; Aftermarket & Accessories; and Industrial Automation.
On September 26, CVGI announced the opening of its newest manufacturing facility in Tangier, Morocco. This deliberate expansion highlights CVGI's commitment to the growth of its global electrification business and represents its first significant establishment in Africa.
Furthermore, by 2024, CVGI aims to significantly expand this facility's square footage, enabling the production of hundreds of thousands of wire harnesses annually for various industries such as agriculture and construction. This strategic location is poised to become a central hub in CVGI's global network, contributing to the local economy in Tangier.
On July 13, CVGI announced the launch of its aftermarket e-commerce venture, AftermarketTruckParts.com, aimed at providing comprehensive support to commercial vehicle operators. Initially, this service will be available in the United States, offering CVGI’s well-known brands such as Bostrom Seats, National Seats, Sprague windshield wiper systems, and Moto Mirror products for online purchase.
Customers can easily explore the company’s product offerings, place orders seamlessly, and have them delivered directly from the factory within a matter of days. This development underscores the user-friendly and rapid nature of the purchasing experience offered by the company’s online platform.
In the fiscal third quarter that ended on September 30, 2023, CVGI’s revenues amounted to $246.69 million, while its gross profit grew 26.4% from the prior-year quarter to $33.92 million.
The company’s adjusted operating and net incomes improved 17.9% and 44.5% from the year-ago values to $12.52 million and $7.34 million, respectively. In addition, its adjusted EPS came in at $0.22, up 46.7% year-over-year.
Analysts expect CVGI’s EPS for the fourth quarter (ending December 2023) to increase 283.3% year-over-year to $0.15. While its revenue for the same quarter is expected to be $225.22 million.
The stock has gained 1.6% over the past year to close the last trading session at $6.50.
It’s no surprise that CVGI has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value and a B for Growth and Quality. In the same industry, it is ranked #12.
In addition to the POWR Ratings we’ve stated above, we also have CVGI’s ratings for Momentum, Stability, and Sentiment. Get all CVGI ratings here.
What To Do Next?
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PCAR shares were trading at $91.12 per share on Tuesday morning, down $0.72 (-0.78%). Year-to-date, PCAR has gained 39.93%, versus a 19.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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