For Immediate Release
Chicago, IL - October 06, 2015 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Superior Industries International, Inc. ( SUP ), Wabash National Corp. ( WNC ), Motorcar Parts of America, Inc. ( MPAA ), Denso Corp. ( DNZOY ) and Fuji Heavy Industries Ltd. ( FUJHY ).
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Here are highlights from Monday's Analyst Blog:
Auto Stocks to Gain from the TPP Deal
After days of hectic parleys, the U.S. and 11 other countries have secured an agreement which will widen the horizons of trade in the Pacific region. The Trans Pacific Partnership (TPP) will cut tariffs and create common standards for all 12 member countries.
An agreement has been reached on several contentious issues, including the auto sector. Such a deal will create new opportunities for companies in Japan while providing adequate protection for U.S. manufacturers. This is why it may be a good idea to add such stocks to your portfolio.
Threat to NAFTA Members
The North American Free Trade Agreement (NAFTA) has helped to create a strong advantage for the auto and auto parts sector in U.S., Canada and Mexico. Any change to the status quo will significantly impact manufacturers in these countries. Mexico stands to lose the most since previous trade agreements has helped to stimulate production and boost investment in that country.
The reason for Mexico and other NAFTA members' fears is the supply chain of Japan's auto sector. Japanese companies are heavily dependent on auto components manufacturing in countries such as China and Thailand. On the other hand, companies from North America source most of their auto components from countries within the proposed TPP trading bloc.
TPP Balances Both Concerns
Consequently, U.S., Canada and Mexico are asking for stricter rules of origin for auto components within the TPP framework. A section of the auto sector had been demanding that at least 50% of the content of auto parts should be sourced from countries within the trading bloc. Others had been demanding an intra-bloc content rate of 60%, closer to the 62.5% that NAFTA stipulates.
Ultimately an agreement has reportedly been reached on a local content rate of 45%. This is higher than the 40% which Japan had been demanding. However, Japan will benefit from the change in the definition of products made within the bloc. Under the new rules of origin, vehicles that utilize parts made outside the trading bloc will pass muster as long as key components are sourced from TPP countries.
Meanwhile, the U.S. imposes a tariff of 2.5% on cars and a 25% tariff on trucks made in Japan. This is will continue since U.S. and Japan have already reached an agreement per which the period for removing auto tariff barriers will be equal to the longest duration among all sectors reached in bilateral talks between TPP countries. One source suggests the longest grace period could extend up to 20 years. Japan will possibly continue to demand that auto tariff barriers be lowered much faster.
Companies in Japan will gain from the ability to retain its existing supply chain of auto parts. This will provide it with a significant cost advantage. Meanwhile, U.S. companies will retain tariff barriers which will allay fears of countries outside the agreement swamping the domestic market with its products.
This is why it may be a good idea to invest in stocks from both the U.S. and Japan which can gain from the agreement on the auto sector. We have narrowed down our search based on good Zacks Rank and other relevant metrics.
Superior Industries International, Inc. ( SUP ) is a designer and manufacturer of cast aluminum road wheels.
Superior Industries International has a Zacks Rank #1 (Strong Buy) and projected growth for the current year is 38.5%. It has a P/E (F1) of 20.62 and its earnings estimate for the current year has increased 18.4% over the last 60 days.
Wabash National Corp. ( WNC ) is one of the leading manufacturers and marketers of truck and tank trailers and related equipment in North America.
Wabash National has a Zacks Rank #2 (Buy) and expected earnings growth of 44.4% for the current year. It has a P/E (F1) is 8.18, lower than the industry average of 15.10.
Motorcar Parts of America, Inc. ( MPAA ) is a leading manufacturer of replacement alternators, starters for imported, bearings, wheel hub assemblies and brake master cylinders and domestic cars and light trucks in the United States and Canada.
Motorcar Parts of America has a Zacks Rank #2 (Buy) and its estimated growth for the current year is 20.9%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 15.61, lower than the industry average of 16.70.
Denso Corp. ( DNZOY ) is a manufacturer and supplier of automotive systems and auto parts.
Denso has a Zacks Rank #2 (Buy) and a P/E (F1) of 13.97, lower than the industry average of 15.10. The company's earnings estimate for the current year has increased 4% over the last 60 days.
Fuji Heavy Industries Ltd. ( FUJHY ) manufactures and markets automobiles and related parts.
Fuji Heavy Industries has a Zacks Rank #2 (Buy) and projected growth for the current year is 36.2%. It has a P/E (F1) of 9.83 and a PEG ratio of 0.60, lower than the industry average of 0.85.
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