The surge in auto sales in 2013 and an optimistic outlook for
2014 have put the automobile sector in focus. Global auto sales
hit a record high of 82.8 million units in 2013, per the data
provided by IHS Automotive.
While most automobile manufacturers were hit hard by the
recession, the resultant pent-up demand is working in their favor
now that employment rates are improving and consumers have
recovered from the impact of the recession.
A plunge in car sales in the years following the recession
have led to an all-time high average age of vehicles on U.S.
roads of 11.4 years. This is resulting in significant replacement
demand. Moreover, with the recovery of global markets, sales in
other nations are also improving.
Asian countries, especially China and India, are recording
impressive sales growth and are expected to account for a large
part of the growth in the auto industry over the next 5 to 7
years. Even the European automobile market is beginning to show
Globally, 2 of the 3 largest selling automakers in 2013 were
non-U.S. companies -
Toyota Motor Corp.
). Moreover, the Auto-Foreign industry has a Zacks Industry Rank
of #13 at present, which translates into a Positive outlook.
Meanwhile, the Auto-Domestic industry has a Zacks Industry Rank
of #99, which refers to a Neutral outlook. Thus, it would be a
good idea to invest in some foreign auto stocks that are
Here are three automakers based outside the U.S. that are
looking good at the moment:
is the leading automaker in the world in terms of sales and
production. Its product portfolio consists of a full range of
models from passenger cars and minivans to trucks as well as
related parts and accessories.
Toyota is currently trading at a forward price-to-earnings
(P/E) ratio of 8.7x, which is significantly lower than the
industry average of 15.6x. It has a price-to-book (P/B) ratio of
1.1x, which is at a discount to the industry average of 2.9x.
Even the price-to-sales (P/S) ratio of 0.8x is lower than the
industry average of 2.5x.
This Zacks Rank #1 (Strong Buy) stock is expected to report a
55.5% year-over-year growth in earnings per share (EPS) in the
fiscal year ended Mar 2014.
Tata Motors Ltd
) is the largest automobile company in India. It is also the
fifth largest truck manufacturer and the fourth largest bus
manufacturer in the world.
Tata Motors also has a P/E ratio of 8.5x, which offers a
significant discount on the industry average of 15.6x. Its P/B of
2.6x is marginally lower than the industry average of 2.9x. It
has a P/S of 0.6x, also below theindustry average of 2.5x.
Tata Motors reported a positive earnings surprise in three of
the trailing four quarters, with an average beat of 22.68%. This
Zacks Rank #1 stock is expected to report 26.6% year-over-year
growth in EPS in the fiscal year ended Mar 2014.
) manufactures and sells passenger cars, trucks, vans, buses, and
related spare parts and accessories. This Zacks Rank #1 stock
owns the premium vehicle brand Mercedes-Benz.
Daimler has a P/E ratio of 11.1x, significantly below the
15.6x industry average. Its P/B and P/S of 1.6x and 0.6x,
respectively, are also substantially lower than the respective
Daimler is expected to report a 16.9% year-on-year surge in
EPS in 2014.
Global automobile sales are expected to rise to 85 million
units in 2014, according to IHS Automotive. Even the 100 million
unit milestone is not far and is expected to be reached in
Rising sales should translate into higher gains for auto
stocks. Thus, adding some automobile stocks with strong
fundamentals and growing earnings to the portfolio might prove to
be beneficial for investors.
DAIMLER AG (DDAIF): Get Free Report
TOYOTA MOTOR CP (TM): Free Stock Analysis
TATA MOTORS-ADR (TTM): Free Stock Analysis
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