The future of the automotive industry appears bright, driven by strong demand for new vehicles, technological advancements, and a rapid shift toward Electric Vehicles (EVs). So, investors could consider investing in top auto stocks Bayerische Motoren Werke Aktiengesellschaft (BMWYY), Isuzu Motors Limited (ISUZY), and Modine Manufacturing Company (MOD) with the potential to transform November into financial success.
Despite challenges like strikes at major automakers and increasing interest rates, U.S. new car sales experienced a significant surge in the third quarter.
Besides, the U.S. EV industry is on the rise, propelled by a combination of environmental consciousness, government policies offering incentives, advancements in battery technology, and reduced operating costs compared to traditional vehicles. Ongoing technological innovations, including autonomous features and connectivity, contribute to the overall appeal of EVs.
It is projected that revenue in the electric vehicles market will reach $70.10 billion this year, The market is expected to expand at a CAGR of 18.2% to reach $161.60 billion by 2028. The electric vehicles market is projected to achieve unit sales of 2.46 million vehicles by 2028.
Moreover, the constant advancements in automotive technology, such as advanced safety features, connectivity, and performance enhancements, drive the demand for new and improved automotive products. The global automotive products market is forecasted to reach a total output of $10.61 trillion in 2023, with an anticipated CAGR of 13.8% from 2023 to 2028.
Furthermore, the automotive market thrives due to innovations in electric and autonomous technologies, responding to environmental demands. Also, urbanization, changing mobility patterns, and consumer preferences for safer and connected vehicles contribute to its growth.
On top of it, vehicle owners’ keen interest in enhancing vehicle performance is the primary driver of the auto parts industry. According to a report by Market Research Future (MRFR), the global auto parts sector will be worth $755 billion by 2026. Additionally, between 2023 and 2032, it is projected to attain a growth rate of 7.5%.
Considering these conducive trends, let’s examine the fundamentals of the three auto stock picks.
Bayerische Motoren Werke Aktiengesellschaft (BMWYY)
Based in Munich, Germany, BMWYY is an international automotive company specializing in the production and sale of automobiles and motorcycles under renowned brands such as BMW, MINI, and Rolls-Royce. The company conducts its operations worldwide through a network of independent dealerships and importers.
On October 26, 2023, BMWYY strengthened its commitment to electromobility by establishing the Cell Manufacturing Competence Center (CMCC) in Parsdorf. With a €170 million ($185.79 million) investment and government support, the CMCC aims to produce innovative battery cells for the upcoming Neue Klasse models, targeting a 30% increase in range.
Prioritizing resource efficiency and sustainability, the center focuses on enhancing battery technology through increased nickel, reduced cobalt, and improved energy density, contributing to BMW's eco-friendly initiatives.
The company pays $3.08 annually, which translates to a yield of 8.75% on the prevailing price level, higher than the four-year average dividend yield of 5.04%. Its dividend payouts have grown at a CAGR of 50.1% over the past three years.
For the nine months ended September 30, 2023, BMWYY's revenues increased 9.2% year-over-year to €112.53 billion ($122.98 billion). The company achieved gross profit of €21.83 billion ($23.85 billion), up 23% year-over-year. Its net profit and EPS amounted to €9.55 billion ($10.44 billion) and €13.91. Also, its cash and cash equivalents as of 30 September amounted to €23.12 billion ($25.26 billion).
BMWYY’s revenue and EPS are expected to grow 2.4% and 32.2% year-over-year to $42.80 billion and $1.59 for the fourth quarter ending December 2023, respectively. The company surpassed the revenue estimates in each of the trailing three quarters, which is impressive.
The stock has soared 21.2% over the past year and 18.5% year-to-date to close the last trading session at $35.16.
BMWYY’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a 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.
BMWYY has an A grade for Stability and a B for Value and Quality. Within the B-rated Auto & Vehicle Manufacturers industry, it is ranked #11 out of 52 stocks.
Click here for BMWYY’s additional Growth, Momentum, and Sentiment ratings.
Isuzu Motors Limited (ISUZY)
Headquartered in Yokohama-shi, Japan, ISUZY is a global manufacturer of commercial vehicles, diesel engines, and components. Their product range includes trucks, buses, SUVs, and industrial engines. The company also offers after-sales services, vehicle leasing, and maintenance contracts.
On October 17, ISUZY and Honda Motor Co. Ltd. (HMC) announced they would debut the GIGA FUEL CELL, a zero-emission heavy-duty truck, at the JAPAN MOBILITY SHOW 2023. Co-developed, the truck utilizes hydrogen fuel cells, offering a range of over 800 km/500 miles.
Public road testing of a prototype is planned for March 2024, with the production model targeted for a 2027 release. The GIGA FUEL CELL, displayed in a Lowdeck 8x4 rigid truck configuration, can also function as a "mobile power station" in emergencies.
During the second quarter ended September 30, 2023, ISUZY generated net sales of ¥1.64 trillion ($11.02 billion), up 9.7% year-over-year. Its gross profit and operating income grew 17.8% and 27.6% year-over-year to ¥327.93 billion ($2.21 billion) and ¥143.20 billion ($963.15 million), respectively.
The company's cash and cash equivalents at the end of the period amounted to ¥379.44 billion ($2.55 billion), up 5.7% from the previous-year quarter.
Street expects ISUZY’s revenue to grow 136.9% year-over-year to $22.82 billion for the fiscal year ending March 2024. The company surpassed the revenue estimates in each of the trailing four quarters.
Shares of ISUZY soared 10.1% over the past month to close the last trading session at $12.74.
ISUZY’s POWR Ratings reflect its robust prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
ISUZY has a B grade for Value, Stability, and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #8 among 52 stocks.
In addition to the POWR Ratings stated above, one can access ISUZY’s additional Growth, Momentum, and Sentiment ratings here.
Modine Manufacturing Company (MOD)
MOD provides engineered heat transfer systems and components for on- and off-highway vehicle OEMs. The company's offerings include heating, ventilation, and cooling products, serving a global client base in North America, South America, Europe, and Asia.
On October 16, MOD introduced the Amp Dawg™, a new electric residential unit heater designed for quiet and efficient heating in spaces like garages and workshops. The low-profile unit comes in 5.7kW and 9.0kW options, offering commercial-grade heating elements, easy installation, and compatibility with smart thermostats.
This release expands MOD's portfolio in the HVAC industry, providing homeowners with a reliable electric heating solution.
For the six months ended September 30, 2023, MOD’s net sales grew 11% year-over-year to $1.12 billion. The company generated gross profit and operating income of $263 million and $132.20 million, up 46.4% and 111.9% year-over-year, respectively. Its adjusted EBITDA and EPS increased 73.4% and 117.5% year-over-year to $161.60 million and $1.74, respectively.
In the fiscal year 2024 outlook, the company anticipates a 6% to 11% increase in net sales. It projects adjusted EBITDA to range from $285 million to $300 million, an increase of 34% to 41% compared to the previous year.
Analysts expect MOD’s revenue and EPS to grow 6.2% and 22.9% year-over-year to $594.85 million and $0.59 for the third quarter ending December 2023. The company surpassed the EPS estimates in each of the trailing four quarters.
The stock has soared 140.5% over the past year and 161% year-to-date to close the last trading session at $51.84.
MOD’s positive fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
MOD has a B grade for Growth, Sentiment, and Quality. Within the A-rated Auto Parts industry, it is ranked #19 out of 61 stocks.
To see MOD’s additional POWR Ratings for Value, Momentum, and Stability, click here.
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BMWYY shares were trading at $34.11 per share on Tuesday morning, down $1.05 (-2.99%). Year-to-date, BMWYY has gained 21.79%, versus a 19.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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