Ford Motor Company (F), in Dearborn, Mich., operates through three segments: Automotive; Mobility; and Ford Credit, and it also holds an ownership position in Argo AI, a developer of autonomous driving systems. Ford’s shares have surged to a seven-year high on investors’ optimism surrounding its third-quarter earnings. The stock has gained more than 28% in price over the past month to close yesterday’s trading session at $19.36.
However, Wall Street analysts expect the stock to hit $18.08 in the near term, which indicates a potential 6.6% decline.. F’s total vehicle sales fell 4% year-over-year to 175,918 in October 2021. Furthermore, analysts expect the company’s revenue and EPS to decline 0.4% and 47.2%, respectively, year-over-year to $33.41 billion and $0.47 for the quarter ending March 31, 2022. So, we think it could be wise to wait for a better entry point in the stock.
The auto manufacturing industry continues to be impacted by the ongoing semiconductor chip shortage. However, according to a Yahoo finance report, there is tremendous pent-up car demand, which should help the industry recover. So, we think it could be wise to invest in quality auto manufacturing stocks Toyota Motor Corporation (TM) and Honda Motor Co., Ltd. (HMC) instead. They both have an overall A (Strong Buy) or B (Buy) rating in our proprietary POWR Ratings system.
Click here to check out our Automotive Industry Report for 2021
Toyota Motor Corporation (TM)
Based in Japan, TM designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories. It operates in Automotive, Financial Services, and All Other segments.
On October 28, 2021, TM GAZOO Racing (TGR) commenced the sale of the all-new GR86 at GR Garage and Toyota dealers nationwide. This is expected to increase the company’s revenues in the near term.
TM’s total revenues increased 36.1% year-over-year to ¥15.48 trillion ($135.87 billion) for the fiscal first half ended September 30, 2021. Its operating income increased 236.1% year-over-year to ¥1.75 trillion ($15.34 billion). Also, its EPS increased 144.1% year-over-year to ¥109.28.
For the fiscal year ending March 2022, TM’s revenue and EPS are expected to grow 10% and 37.8%, respectively, year-over-year to $273.05 billion and $20.22, respectively. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 26.7% in price to close yesterday’s trading session at $177.36.
TM’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a B grade for Growth, Stability, and Sentiment. TM is ranked #10 of 62 stocks in the Auto & Vehicle Manufacturers industry. Click here to see the additional POWR Ratings for TM (Momentum, Value, and Quality).
Honda Motor Co., Ltd. (HMC)
Japan-based HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products, both domestically and internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, Life creation, and Other Businesses.
On October 26, 2021, HMC announced its return to SEMA with the debut of its 2022 Civic Si Race cars with rugged overlanding trucks. Fully equipped for overlanding, the Passport TrailSport Rugged Roads Project 2.0 and the Ridgeline HPD Trail Tour Project highlight the company’s consistent product innovation.
For the fiscal first half, ended September 30, 2021, HMC’s sales increased 21% year-over-year to ¥6.99 trillion ($61.33 billion). The company’s operating profit increased 161.3% year-over-year to ¥442.1 billion ($3.88 billion). Its profit came in at ¥389.2 billion ($3.42 billion), up 143.25% year-over-year.
HMC’s revenue is expected to be $131.68 billion for its fiscal year ending March 2022, representing a 365.5% year-over-year rise. In addition, the company’s EPS is expected to increase 31.4% year-over-year to $4.21 for its fiscal year ending March 2023. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 2.3% in price to close yesterday’s trading session at $28.70.
It is no surprise that HMC has an overall A rating, which equates to a Strong Buy in our POWR Rating system. The stock has an A grade for Value, and a B grade for Sentiment and Stability.
HMC is ranked #4 in the Auto & Vehicle Manufacturers industry. Click here to see the additional POWR Ratings for HMC (Quality, Momentum, and Growth).
Click here to check out our Automotive Industry Report for 2021
TM shares were trading at $178.61 per share on Thursday afternoon, up $1.25 (+0.70%). Year-to-date, TM has gained 17.20%, versus a 25.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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