The auto industry is evolving with technological advancements such as electric vehicles (EVs) and self-driving cars. Therefore, I think investing in auto stocks Hyster-Yale Materials Handling, Inc. (HY), Standard Motor Products, Inc. (SMP), and Miller Industries, Inc. (MLR) could be worth it.
In March 2023, new vehicle sales in the United States totaled 1,384,676 units, a 19.2% rise from February 2023 and a 9.4% increase from March 2022.
The auto industry contributes 3% of the US GDP. In 2022, the US automobile industry is estimated to have sold 13.75 million cars and light trucks.
According to Charlie Chesbrough, senior economist at Cox Automotive: “Relatively strong sales in the wake of rising interest rates and worsening economic headwinds suggests there remains some pent-up demand. Product availability has improved substantially over this time last year. Dealer lots are no longer empty, so there is far more selection for vehicle shoppers that may have been waiting to buy a particular model or configuration.”
Let’s delve deeper into the fundamentals of the stocks mentioned to see why they are the best picks to capitalize on the industry’s prospects.
Hyster-Yale Materials Handling, Inc. (HY)
HY designs, engineers, manufactures, sells, and services a line of lift trucks, attachments, and aftermarket parts worldwide. The company manufactures components, such as frames, masts, and transmissions; and assembles lift trucks.
HY’s trailing-12-month asset turnover ratio of 1.78x is 120.2% higher than the industry average of 0.81x.
HY’s revenues increased 18.7% year-over-year for the fourth quarter ended December 31, 2022, to $985.20 million. The company’s gross profit increased 131% year-over-year to $146.70 million.
Its net income attributable to stockholders came in at $7.60 million, compared to a net loss of $103.30 million in the prior-year quarter. Also, its EPS came in at $0.44, compared to a loss per share of $6.14 in the year-ago period.
Analysts expect HY’s revenue to increase 2.2% year-over-year to $3.98 billion in 2024. Its EPS is expected to grow 27% year-over-year to $2.76 for the same period. It surpassed EPS estimates in three of four trailing quarters. HY’s shares have gained 80% over the past six months to close the last trading session at $52.66.
HY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HY has an A grade for Sentiment and a B for Growth, Value, and Momentum. Within the A-rated Auto Parts industry, it is ranked #17 out of 60 stocks. Click here for the additional POWR Ratings for Stability and Quality for HY.
Standard Motor Products, Inc. (SMP)
SMP manufactures and distributes automotive parts that are used in the maintenance, repair, and service of vehicles in the automotive aftermarket industry in the United States and internationally.
SMP’s trailing-12-month EBITDA and EBIT margins of 12.07% and 10.06% are 5.9% and 29.1% higher than the industry averages of 11.40% and 7.79%, respectively.
SMP’s revenues increased 5.6% for the year that ended December 31, 2022, to $1.37 billion. Its gross profit increased marginally year-over-year to $382.54 million.
Street expects SMP’s revenue to increase 3.3% year-over-year to $1.42 billion in 2023. It’s EPS to grow marginally year-over-year to $3.62 for the same period. It has surpassed EPS estimates in three of trailing quarters. SMP’s shares have gained 3.5% year-to-date to close the last trading session at $36.01.
It’s no surprise that SMP has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Sentiment, Momentum, and Quality. It is ranked #28 in the same industry.
Beyond what is stated above, we’ve also rated SMP for Value, Stability, and Growth. Get all SMP ratings here.
Miller Industries, Inc. (MLR)
MLR, together with its subsidiaries, manufactures and sells towing and recovery equipment.
MLR’s trailing-12-month CAPEX/Sales of 3.41x is 15.3% higher than the 2.96x industry average. Its trailing-12-month asset turnover ratio of 1.81x is 74.7% higher than the 1.04x industry average.
For the fiscal fourth quarter ended December 31, 2022, MLR’s net sales increased 12% year-over-year to $225.85 million. Its net profit came in at $9.29 million, up 242.2% year-over-year, while its EPS came in at $0.81, up 237.5% year-over-year.
Over the past nine months, the stock has gained 39.3% to close the last trading session at $32.60.
MLR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #30 in the same industry. It has a B for Growth and Sentiment. To see additional MLR’s rating for Stability, Value, Momentum, and Quality, click here.
What To Do Next?
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HY shares were trading at $53.45 per share on Monday morning, up $0.79 (+1.50%). Year-to-date, HY has gained 113.29%, versus a 9.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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