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U.S. auto sales jumped in August helped by higher sales of SUVs, crossovers and pickup trucks. Both Ford Motor Company (NYSE: F ) and Fiat Chrysler Automobiles (NYSE: FCAU ) reported year-over-year increases. Also, sales of Honda Motor Company (NYSE: HMC ) and Nissan Motor Co (OTCMKTS: NSNAY ) rose in August.
The overall jump in auto sales is an indication of a booming economy that follows a rise in consumer confidence, which is near an 18-year high. This indicates that President Donald Trump's protectionist trade policies too haven't dented investor confidence much. Given this scenario, it makes good sense to indulge in stocks gaining from the jump in sales.
August Auto Sales Jump
Major automakers reported a jump in August auto sales. Ford reported a nearly 4.1% rise in auto sales. The company sold 218,504 vehicles in August compared with 209,897 vehicles in the year-ago period. Fiat Chrysler's sales jumped 10%. The automaker reported sales of 193,718 vehicles, driven by high demand for Jeep and Ram.
Honda and Nissan also reported an increase in vehicle sales in August. Honda's U.S. sales rose 1.3% in August to 147,903 vehicles, while Nissan's sales jumped 4% to 112,376 vehicles. The U.S. car industry has been suffering for a while. In 2017, auto sales declined 2% after hitting a record high of 17.55 million units in 2016. Moreover, the auto industry has had a roller coaster ride this year too, with automakers reeling under trade war fears. However, the jump in August auto sales is definitely going to bring a smile on the faces of carmakers.
Price Performance: Year to Date
SUVs, Trucks Help August Auto Sales
All major automakers reported a decline in sales of passenger cars. The rise in August auto sales can be primarily attributed to robust demand for SUVs, crossovers and trucks, which accounted for 68% of new-vehicle retail sales in August, according to J.D. Power. Sales of Ford's SUV brands jumped 20.1%, while pickups grew 5.7% in August. Ford's passenger car sales declined 21.3% in August.
Fiat's Ram sales surged 55% in August to 36,798 vehicles, while Jeep sales went up to 87,502 units. At the same time, Fiat's Dodge and Chrysler brands declined 18% and 3%, respectively, over the same time period. Toyota Motor Corporation's (TM) SUV sales jumped 11.7% through August. Understandably, sedans are fast losing their appeal to American customers, which have made automakers like Ford announce that it would gradually stop production of passenger cars in the United States.
Favorable Economic Scenario
The jump in August auto sales follows a rise in consumer confidence, which is near an 18-year high. Moreover, higher wages, stable jobs, unemployment level at a 19-year low all pointy all hint at a booming economy. This definitely has given a boost to consumers' confidence, resulting in higher spending.
At the same time, trade war fears too don't seem to have affected investors' sentiment much. Moreover, last week United States and Mexico entered into a new agreement to overhaul the North American Free Trade Agreement (NAFTA). The new pact will bring a sigh of relief to domestic automakers, which have been reeling under trade war fears, as a number of U.S. automakers have their production units in Mexico.
The jump in August auto sales will definitely boost automakers' confidence. A near 18-year-high consumer confidence is an indicator of customers' willingness to spend more. Moreover, higher wages and unemployment level at a 19-year low is sign of a booming economy. Given this scenario, it makes good sense to invest in stocks benefiting from the spike in auto sales.
However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Fox Factory Holding Corp (NASDAQ: FOXF ) is a designer, manufacturer and marketer of suspension products used primarily on mountain bikes, side-by-side vehicles, on-road vehicles, off-road vehicles, all-terrain vehicles, snowmobiles, specialty vehicles and applications and motorcycles.
The company has expected earnings growth of 31.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 14.2% over the last 60 days. The stock sports a Zacks Rank #1 (Strong Buy).
PACCAR Inc (NASDAQ: PCAR ) is a global technology company that designs and manufactures premium quality light, medium and heavy duty commercial vehicles sold worldwide under the Kenworth, Peterbilt and DAF nameplates.
PACCAR has a Zacks Rank #2 (Buy). The company has expected earnings growth of 41.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.2% over the last 60 days.
O'Reilly Automotive Inc (NASDAQ: ORLY ) is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both professional service providers and do-it-yourself customers.
O'Reilly Automotive has a Zacks Rank #2. The company has expected earnings growth of 34.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 2.4% over the last 60 days.
Advance Auto Parts (NYSE: AAP ) a leading automotive aftermarket parts provider in North America, serves both the professional installer and do-it-yourself customers.
Advance Auto Parts carries a Zacks Rank #2. The company has expected earnings growth of 28.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.9% over the last 60 days.
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