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5 Auto Stocks to Buy on Record January Sales

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U.S. auto sales remained mostly unscathed by a bitter winter blizzard to post their best January numbers in more than 15 years. Low fuel prices combined with other factors led to encouraging figures even as valuable days were lost to the storm. Most of these factors, such as a strong labor market, will continue to support the sector going forward.

At this point, the sector still seems to be on track for a strong year. This is why it may a good idea to pick select stocks from this sector for your portfolio.

Subdued Jonas Effect

Sales seemed to be mostly unhindered by a historic snowstorm which affected most of the East Coast. This led to the loss of crucial selling days for auto dealers. Per Autodata Corp.'s estimates, sales were mostly flat compared to last month, declining by 1% to 1.15 million.

However, the annualized selling pace came in at 17.58 million compared with December's figure of 17.34 million. Several major automakers experienced higher-than-expected sales or lost less than the projection. For instance, sales of Ford Motor Co. F declined by 2.8% compared to the forecast of a 3.2% fall. Fiat Chrysler Automobiles N.V. FCAU increased by 7% against an expected decline of 0.1%.

Factors Driving Growth

Record low costs of gasoline are the primarily driver of automobile sales growth. On Jan 25, the American Automobile Association (AAA) said that prices had remained below $2 for 25 successive days. Currently, prices continue to remain under this level. Additionally, companies have continued to introduce new attractive models, particularly small SUVs.

Other factors boosting growth included low interest rates and strength in the jobs sector. Taken together these have widened the average buyer's spending power. They now prefer to buy expensive trucks and SUVs. According to automobile research company Kelley Blue Book, the average transaction price increased by 2% to $34,112 last month.

Playing the Incentive Game

Most industry watchers believe that the industry will continue to experience growth this year. A section of analysts believe that domestic light vehicle sales could touch the 18 million mark, exceeding 2015's pace of 17.5 million. However, the pace may drop as demand begins to peak, some opine.

In order to combat such a scenario, auto companies have resorted to providing lucrative incentives, including cash back offers. According to Kelley Blue Book, incentives increased by $150 per vehicle to nearly $3,000. This figure could increase further as Japan's auto companies attempt to push sales ahead of the end of their fiscal year in March.

Our Choices

A variety of factors are proving to be beneficial for auto sales at this point. With the labor market continuing to show improvement and fuel prices moving lower, auto sales are likely to receive a further boost in the days ahead.

With prospects of an excellent year ahead, this is a good time to add such stocks to your portfolio. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

General Motors CompanyGM has increased its 2016 earnings guidance. It has adopted a comprehensive capital allocation strategy, which reflects its strong operating performance and robust financial position.

GM has a Zacks Rank #2 (Buy) and projected growth for the current year is 14.6%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 5.52, lower than the industry average of 9.23. Its earnings estimate for the current year has improved 2.2% over the last 30 days.

Nissan Motor Co. Ltd.NSANY manufactures and markets motor vehicles and parts.

Nissan has a Zacks Rank #1 (Strong Buy) and expected earnings growth of 20.8% for the current year. It has a P/E (F1) of 8.45, in line with the industry average. Its earnings estimate for the current year has improved 9% over the last 30 days.

The Goodyear Tire & Rubber CompanyGT sells tires, undertakes automotive repairs and provides other services. It expects annual segment operating income to increase in 2015 and 2016.

Goodyear has a Zacks Rank #2 and expected earnings growth of 17.6% for the current year. It has a P/E (F1) of 7.82, lower than the industry average of 7.99. Its earnings estimate for the current year has improved 1.1% over the last 30 days.

Lear Corp.LEA is a leading global supplier of automotive seating systems, electrical distribution systems and electronics.

Lear Corp. has a Zacks Rank #2 and its projected growth for the current year is 11.3%, in line with the industry average. It has a P/E (F1) of 7.82, lower than the industry average of 7.99. Its earnings estimate for the current year has improved 2.1% over the last 30 days.

Visteon CorporationVC is a designer, producer and manufacturer of connected car solutions and vehicle cockpit electronic products.

Visteon has a Zacks Rank #1 and its estimated growth for the current year is 24.4%.Its earnings estimate for the current year has improved 7% over the last 30 days.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

FORD MOTOR CO (F): Free Stock Analysis Report

NISSAN ADR (NSANY): Free Stock Analysis Report

LEAR CORPORATN (LEA): Free Stock Analysis Report

VISTEON CORP (VC): Free Stock Analysis Report

GOODYEAR TIRE (GT): Free Stock Analysis Report

GENERAL MOTORS (GM): 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 Nasdaq, Inc.


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

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