Auto Sales Up: 3 Stocks to Buy - Analyst Blog


The U.S. automakers have started 2014 on a positive note by reporting strong sales results back to back for April and March. On the basis of seasonally adjusted annualized rate (SAAR), the auto sales in April have increased 5.9% to 16.1 million units from the year-ago level of 15.2 million. However in March, sales were at 16.4 million units.

Performance of Domestic Automakers

General Motors Company ( GM ) recorded 254,076 vehicle sales in April, up 7% year over year. Retail sales also increased 8%, while fleet sales improved 5%. The company is set to launch many vehicles in 2014, which are likely to improve sales in the coming months.

Ford Motor Co. ( F ) reported a 1% decline in total sales from the year-ago period to 211,126 vehicles in Apr 2014. Retail sales fell 1% year over year to 141,950 units. However, commercial and government fleet sales increased significantly.

Chrysler Group - controlled by Italy's Fiat S.p.A ( FIATY ) - recorded a 14% year-over-year rise in sales, pulling the figure up to 178,652 vehicles. Chrysler witnessed a year-over-year increase in monthly sales for 49 consecutive months. Moreover, this is the best April sales for the group since 2007.   

Reasons Behind Increasing Auto Sales

With the arrival of spring season, the automobile sector started to bloom by reporting positive sales results. It is the combined effect of delayed purchases and the beginning of the spring selling season that bolstered auto sales in April. This had also helped sales to move north in March.

Another factor which played an important role is the incentives given by the automakers and the dealers. Incentives are given in the form of discount, low interest rate and free accessories, among others, to attract customers.  According to TrueCar, in April, average incentive is expected to be $2,580 which is $41 higher than last year. In March, there was almost an 8% hike in incentives, which increased the average incentive per new vehicle sale to $2,800.

Durable Orders

Auto parts industry is likely to benefit from these impressive auto sales results. This has been somewhat proved right by the previous durable order reports. According to the U.S. Department of Commerce, new orders for motor vehicles and parts increased 0.4% in March. This followed a 4.3% increase in February after declining 2% in January.  

Auto Stocks to Buy Now

Standard Motor Products Inc. ( SMP ) is a manufacturer and seller of replacement parts in the automotive aftermarket industry. The company develops engine management replacement parts, and also manufactures replacement parts for automotive temperature control systems.

Recently, the company reported a 26.2% rise in adjusted earnings per share to 53 cents in the first quarter of 2014. Also, earnings outpaced the Zacks Consensus Estimate of 47 cents.

SMP currently holds a Zacks Rank #2 (Buy) and has expected current year earnings growth of 14.08%. The forward price-to-earnings ratios (P/E) for the current financial year (F1) is 14.67 and price-to-sales (P/S) ratio is 0.9. The stock has returned 5.5% year to date.

Magna International Inc. ( MGA ) is manufacturer and seller of automotive products. The company's offerings include body, chassis, and renewable energy and powertrain systems. The company also offers closure systems like door modules and window systems.

MGA currently holds a Zacks Rank #2 (Buy) and has expected current year earnings growth of 11.87%. The forward price-to-earnings ratios (P/E) for the current financial year (F1) is 12.21 and price-to-sales (P/S) ratio is 0.63. The stock has returned 20.3% year to date.

Remy International, Inc. ( REMY ) manufactures and sells rotating electrical components for automobiles and trucks. The product offerings include starters and alternators that are used in gasoline, diesel, natural gas and alternative fuel engines. The products are supplied to original equipment manufacturers for installation in the factory on new vehicles.

REMY currently holds a Zacks Rank #2 (Buy) and has expected current year earnings growth of 26.62%. The forward price-to-earnings ratios (P/E) for the current financial year (F1) is 14.05 and price-to-sales (P/S) ratio is 0.7. The stock has returned 6.0% year to date.

FORD MOTOR CO (F): Free Stock Analysis Report

FIAT SPA (FIATY): Get Free Report

GENERAL MOTORS (GM): Free Stock Analysis Report

MAGNA INTL CL A (MGA): Free Stock Analysis Report

REMY INTL INC (REMY): Get Free Report

STANDARD MOTOR (SMP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: F , FIATY , GM , MGA , REMY

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