The automotive industry has gained traction over the past few years, thanks to an increasing shift toward electric vehicles. Despite the global supply chain challenges, EV sales registered a 75% increase year-over-year, with 2 million EVs sold globally in the first quarter. This, along with subdued production of new vehicles, has driven the demand for automotive parts.
The U.S. automotive aftermarket is expected to reach $464.9 billion in 2026, growing at a CAGR of 3.08%. Innovations in electrification, connectivity, autonomous driving, and technology implementation are expected to drive the industry’s long-term growth prospects. The global auto parts and accessories market is expected to reach $2.64 trillion by 2027, growing at a CAGR of 2.8%.
Thus, we think investors should buy the dip in quality auto parts stocks Allison Transmission Holdings, Inc. (ALSN), Ituran Location and Control Ltd. (ITRN), and Garrett Motion Inc. (GTX).
Allison Transmission Holdings, Inc. (ALSN)
ALSN is a manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and electric hybrid and fully-electric propulsion systems.
On June 21, the company’s Allison 9832 Oil Field Series (OFS) transmission outperformed in one of the world’s largest oil fields in China. Due to its proven reliability, durability, and high efficiency, it’s expected to witness heavy demand from the energy sector.
On May 10, ALSN partnered with Xos, Inc. (XOS) to develop heavy-duty commercial electric vehicles. This partnership might boost the growth prospects of both companies significantly.
In the first quarter ended March 31, 2022, ALSN’s net sales increased 15% year-over-year to $677 million. Its gross profit rose 10% from its year-ago value to $320 million, while its net income grew 7.5% to $129 million. The company’s earnings per share attributable to common stockholders increased 21.5% from the year-ago value to $1.30.
The consensus EPS estimate of $1.56 for the fiscal second quarter (ending June 2022) represents a 42% improvement year-over-year. The consensus revenue estimate of $687.83 million for the ongoing quarter indicates a 14.1% increase from the same period last year.
Shares of ALSN have slumped 5.8% over the past three months to close yesterday’s trading session at $37.82.
ALSN’s POWR Ratings reflect solid prospects. The stock has an overall B rating, translating to a Buy in our proprietary rating system. It has an A grade for Quality and a B grade for Value. Within the B-rated Auto Parts industry, it is ranked #6 out of 69 stocks.
Click here to see the other ratings of ALSN for Growth, Momentum, Stability, and Sentiment.
Ituran Location and Control Ltd. (ITRN)
ITRN offers location-based services, such as stolen vehicle recovery (SVR), fleet management services, and other tracking services. It also provides wireless communication products used in connection with its location-based services and various applications.
On May 24, the company’s Board of directors declared a cash dividend of $0.14 per share, payable on July 14, 2022. This reflects the company’s strong cash flows.
ITRN’s revenue increased 7% year-over-year to $72.07 million in the fiscal first quarter (ended March 31, 2022). Its gross profit grew 9% from the year-ago value to $33.26 million, while its net income attributable to the company increased 6% year-over-year to $8.73 million over the period. The company’s earnings per share attributable to the company’s stockholders increased 7.5% from the year-ago value to $0.43.
Analysts expect ITRN’s EPS and revenue to increase 4.6% and 6.6% year-over-year to $0.46 and $71.94 million, respectively, in the fiscal second quarter (ending June 2022).
The stock has declined 9.9% year-to-date and 11% over the past year to close the last trading day at $24.04.
ITRN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. ITRN also has an A grade for Stability and a B for Quality. The stock is ranked #1 of 69 stocks in the same industry.
In addition to the POWR Ratings I’ve just highlighted, click here to see the ITRN ratings for Growth, Value, Momentum, and Sentiment.
Garrett Motion Inc. (GTX)
GTX provides turbocharger and electric boosting technologies for the automotive industry. The company offers light-vehicle gasoline, light-vehicle diesel, and commercial vehicle turbochargers; and provides automotive software solutions.
On April 26, GTX exhibited next-gen electrification and connected vehicle innovations at Vienna Motor Symposium. The company’s advanced automotive software solutions are expected to attract strong demand from automakers globally.
During the fiscal 2022 first quarter (ended March 31, 2022), GTX’s net income increased 183.8% year-over-year to $88 million. The company’s earnings per common share came in at $0.15, representing a 110.9% increase year-over-year.
Analysts expect GTX’s EPS to increase 40% year-over-year to $0.28 in the fiscal third quarter (ending September 2022). GTX’s revenue is expected to increase 11.4% year-over-year to $935 million in the next quarter.
Over the past year, the stock has declined marginally to close the last trading session at $8.06.
The company has an overall rating of B, which equates to Buy in our POWR Ratings system. GTX also has an A grade for Value and a B for Stability, Sentiment, and Quality. The stock is ranked #8 of 69 stocks in the Auto Parts industry.
Click here to see the other ratings of GTX for Growth and Momentum.
ALSN shares were trading at $37.25 per share on Thursday morning, down $0.57 (-1.51%). Year-to-date, ALSN has gained 3.58%, versus a -20.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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