Markets

Bull of the Day: Superior Industries (SUP)

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The automotive market has been one of the strongest performing sectors for the past year. For the Q1 earnings season, we have seen just over 80% of the total companies within the sector report earnings, and they have posted a year over year gain of +63% (the best performing group of all 16 Zacks sectors). Then it was announced yesterday that U.S. light-vehicles sales saw renewed growth in April as low gas prices, easy financing, and improving consumer confidence has driven more new customers to car dealerships. This improvement coupled with an amazing recent earnings, has brought Superior Industries ( SUP ) into focus, and is our Zacks Bull of the Day.

This Zacks Ranked #1 (Strong Buy) company designs and manufactures cast aluminum road wheels primarily for the domestic original equipment manufacturer (OEMs) market. It also designs a variety of products for the automotive aftermarket, including custom road wheels and accessories. Also, the company is the largest manufacturer of aluminum wheels for passenger cars and light-duty vehicles in North America. The company supplies many of the top car manufacturers like BMW, Ford, GM, Fiat Chrysler, Nissan, Subaru, and Mazda.

The company reported Q1 16 earnings last week where they posted year over year increases in EPS +250%, wheel shipments +25.3%, value-added sales +24.4%, adjusted EBITDA +110.2%, and gross profit +147%. Further, the company saw net income improve +233.7% during the quarter. Lastly, management was also able to return $16.6 million in capital to shareholders via dividends, and stock repurchases during the first quarter 2016.

According to Don Stebbins, President and CEO, "Our results in the first quarter are encouraging and a testament to the solid execution throughout the organization. The 25.3% increase in unit volume was driven by strong growth in our passenger car shipments on top of sustained increases in our light truck programs. In addition to higher unit volumes, our improved adjusted EBITDA was driven by improved cost performance, as we continued to benefit from the strategic changes to our manufacturing footprint, higher volumes in our new facility in Mexico, and greater efficiencies across our manufacturing platform.

As you can see from the graph below, Superior's price and earnings consensus had been rather flat for the past several years, but has seen a massive jump in 2016.

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Increasing Estimates

Due to the strong earnings report, Superior's earnings estimates for Q2 16, Q3 16, FY 16 and FY 17 have all increased over the past seven days. Q2 16 rose from $0.39 to $0.45, Q3 16 improved from $0.32 to $0.36, FY 16 was lifted from $1.55 to $1.88, and FY 17 jumped up from $1.78 to $2.02.

Bottom Line

In the April auto report, Fiat Chrysler saw April sales improve +5.6% with record sales for their Renegade and Compass vehicles, General Motors saw retail sales rise +3.3% with strong sales in their Buick, Chevrolet, and GMC vehicles, and Ford witnessed sales improving +3.6% as they sold 229,739 light vehicles during the month. Therefore, each manufacturer will need to order more road wheels from Superior Industries.

Finally, Superior Industries carries Zacks A rating for Value investors, Growth Investors, and Momentum investors for a total VGM score of A.

Note

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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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