(TSLA) has stolen the spotlight this year for growth and stock
volatility, investors in another unique car company have been
quietly and steadily rewarded.
(TTM) shares are up roughly the same 35% year-to-date as TSLA (as
of Wednesday 5/21), but with far less volatility. A 41% earnings
surprise for their December quarter (3QFY13) helped the outlook as
sales in the British Jaguar Land Rover unit grew 23%, with demand
for their luxury vehicles increasing in China, North America and
This made the stock a stock a Zacks #1 Rank in February after the
report and my colleague Neena Mishra chose Tata for her Bull of the
Day on March 6, where she remarked on the company's key acquisition
six years ago...
"Tata Motors had acquired both the Jaguar and Land Rover brands
from Ford Motors in 2008 and turned them around into a major profit
source. Management expects the sales and performance momentum for
Jaguar Land Rover to continue with a richer product and geography
Back to #1
This week, Tata earns back the top Zacks Rank as analysts hike
estimates following record April sales for Land Rover at +28%
year-over-year. This prompted Jefferies & Company to boost 2014
EPS estimates from $3.86 to $4.31 and next year profit targets from
$3.98 to $4.42.
This pushed up the 2015 EPS consensus of India's top car and truck
maker to $4.52 and brought down the forward P/E multiple under 9X,
in line with competitor
(TM). Tata ranks as the world's fifth largest truck manufacturer
and fourth largest bus manufacturer with operations in the UK,
South Korea, Thailand, South Africa and Indonesia.
Though less than 1/6 Toyota's size, the $26 billion Tata compares
very well on a price-to-sales basis too as they get only a slight
premium of 0.72 vs 0.67 for 4 times the projected growth rate of
the $171 billion Japanese behemoth.
India's Top Brand
In a 2013 study, The Economic Times of India found Tata to be the
country's most revered brand, noting "In a free enterprise, the
community is not just another stakeholder in business, but is, in
fact, the very purpose of its existence'; that, in a nutshell, is
the fundamental philosophy espoused by founder Jamsetji Tata."
The Tata industrial group of companies operates in sectors that
encompass steel and energy as well as autos. Tata Motors traces its
roots back to 1945 when the Tata Engineering and Locomotive Co. was
established to manufacture locomotives and other engineering
Several interesting milestones in the company's history mark the
path of a key automotive partner and growing empire in the world's
second most populous country...
1954: Collaboration with Daimler Benz for manufacture of medium
1983: Manufacture of Heavy Commercial Vehicle commences
1985: First hydraulic excavator produced in collaboration with
1991: Launch of first indigenous passenger vehicle, the Tata
Sierra, and 1 millionth commercial vehicle sold
1993: JV with Cummins (CMI) for manufacture of high horsepower and
emission friendly diesel engines
1994: JV with Daimler-Benz for manufacture of Mercedes Benz
passenger cars in India
2005: Launch of Tata TL 4X4, India's first Sports Utility Truck,
and 1 millionth passenger car sold
2006: 3 millionth commercial vehicle sold
2008: Tata Motors unveils its People's Car, Tata Nano, at the 9th
2009: Launch of the Jaguar Land Rover range of premium luxury
vehicles -- Jaguar XF, XFR & XKR and Land Rover Discovery 3,
Range Rover Sport and Range Rover in India
2010: Tata Nano receives the world's oldest and most coveted GOOD
DESIGN™ Award for 2010, 4 millionth commercial vehicle sold
2013: Tata Nano offered industry first phenomenon - Swipe your
credit card and drive home a Nano
A Modi-fied Economy
In Neena's March report on Tata, she noted that the Jaguar Land
Rover brands are carrying the day right now for the company in
terms of growth...
"Sales of Tata-branded vehicles fell 36% in India due to weakening
demand, increasing competition, and a tight financing environment.
Management hopes that recent launches including Nano Twist and
Vista VXTech and upcoming products like BOLT and ZEST will be able
to drive sales in India and some of the international markets where
they are expanding."
Clearly, the Jaguar Land Rover unit is a key growth asset for Tata.
But other good news could be brewing for India's automotive
powerhouse following the national election of the pro-growth
Narendra Modi and his Bharatiya Janata Party (BJP).
According to our in-house all-things-political-in-India expert
"With a landslide win, BJP led by Modi is all set to form the
government on its own in India, without having to rely on smaller,
regional parties' support. No single political party had won an
absolutely majority in India since 1984 and coalition politics has
been one of the main reasons for the policy paralysis seen in
recent year as regional parties had their own narrow interests and
agendas and often blocked reform measures. With a decisive mandate,
it would be easy for the Modi government to effectively execute
their reforms agenda which should accelerate economic growth in
And this is indeed what many US investment analysts recognize as
they continue to raise their targets for India's stock market
index, the Sensex. While Tata shares have had quite a run already
this year, I bet this stock will still be under accumulation by
large investors any time it dips to its 50-day moving average.
Tata Motors reports for the March quarter on Thursday May 29.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs
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