Considering the ongoing advancements and digitalization in the auto sector, it could be wise to monitor prominent auto parts stocks Valeo SE (VLEEY), Miller Industries, Inc. (MLR), and Modine Manufacturing Company (MOD) for potential gains. Before delving into these highlighted stocks, let's examine the industry's dynamics.
Despite the pandemic's adverse effects on global automotive sales, suppliers adeptly managed the challenging landscape. They sustained operations, met customer demands, and actively pursued expansion opportunities, demonstrating remarkable resilience.
The industry responded to pandemic-induced supply chain disruptions and escalating bottlenecks due to the Russia-Ukraine conflict with innovative solutions. Automakers started transitioning from "just-in-time" to "inventory banking" strategies to bolster supply and address these challenges effectively.
According to the joint report by J.D. Power and GlobalData, U.S. new vehicle sales are estimated to reach 1,354,600 units in August, indicating a 15.4% jump year-over-year. Moreover, on the backs of improving supply chains, global sales for 2023 are expected to reach 86.8 million units, higher than the previous estimate of 86.4 million units.
In addition, the surging demand for vehicles, consistent aftermarket sales growth, and the burgeoning interest in electric and hybrid vehicles are propelling the global auto parts manufacturing sector.
According to a report by Research and Markets, the global auto parts manufacturing market is estimated to grow at a CAGR of 6.3% and reach $939.21 billion by 2028.
The industry is poised for further growth due to the rising demand for automotive customization, the advent of advanced technologies such as navigation systems, infotainment systems, and advanced driver assistance systems, and the emergence of e-commerce platforms that provide automotive parts.
Considering these conducive trends, let's take a look at the fundamentals of the three best Auto Parts stocks, starting with number 3.
Stock #3: Valeo SE (VLEEY)
Based in Paris, France, VLEEY manufactures and markets automotive components, systems, and services. It provides parking and driving aids, intuitive controls, and innovative connectivity solutions. The company's segments include Comfort & Driving Assistance Systems; Powertrain Systems; Thermal Systems; and Visibility Systems.
On May 29, VLEEY unveiled a strategic collaboration and investment agreement with DiDi Autonomous Driving, an early entrant into China's L4 autonomous driving realm. VLEEY aims to invest in DiDi Autonomous Driving, fostering a joint venture focused on devising advanced safety solutions for L4 robotaxis.
VLEEY's extensive experience in L4 autonomous driving complements DiDi Autonomous Driving's technological prowess and shared mobility focus. This strategic partnership would enhance VLEEY's commitment to delivering smart, safe, and affordable mobility solutions.
On May 23, VLEEY and Renault Group unveiled a collaboration aimed at advancing the electrical and electronic architecture for the group's forthcoming vehicle generation. The Software Defined Vehicle (SDV) architecture ensures continuous updates and seamless integration of new features without necessitating hardware alterations.
This strategic alliance is expected to expand VLEEY's technological portfolio and potentially increase revenue streams through Renault Group's market presence and customer base.
For the fiscal first half that ended June 30, 2023, VLEEY’s sales increased 19% year-over-year to €11.21 billion ($12.08 billion). Its operating margin grew 40.7% from the year-ago value to €363 million ($391.05 million).
In addition, the company’s net income for the period and EPS came in at €153 million ($164.82 million) and €0.49, compared to a net loss and loss per share of €16 million ($17.23 million) and €0.20 in the prior year’s period.
The consensus revenue estimate of $24.33 billion for the fiscal year ending December 2023 reflects a 14.5% year-over-year rise. Likewise, the consensus EPS estimate of $0.93 for the ongoing year indicates an 84.7% year-over-year improvement. VLEEY’s shares have gained 3.6% over the past year to close the last trading session at $9.63.
VLEEY’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
VLEEY has an A grade for Value and a B for Stability. It has ranked #16 out of 59 stocks in the A-rated Auto Parts industry.
In addition to the POWR Ratings I’ve just highlighted, you can see VLEEY’s ratings for Growth, Sentiment, Momentum, and Quality here.
Stock #2: Miller Industries, Inc. (MLR)
MLR produces and sells towing and recovery equipment. It provides wreckers designed for the retrieval and towing of disabled vehicles and equipment, as well as specialized car carriers equipped with hydraulic tilt mechanisms for transporting both new and disabled vehicles and equipment.
On May 31, MLR disclosed its acquisition of Southern Hydraulic Cylinder, Inc., a specialized custom hydraulic cylinder manufacturer. The strategic purchase involved an all-cash transaction, with an aggregate purchase price of around $17.50 million.
Southern Hydraulic Cylinder excels in crafting and providing tailor-made welded hydraulic cylinders, catering to diverse industrial sectors. The acquisition stands to fortify MLR's supply chain stability while offering anticipated accretive benefits within the initial year, enhancing the company's overall operational efficiency and competitiveness.
During the first quarter that ended March 31, 2023, MLR’s net sales increased 31% year-over-year to $282.28 million. Its gross profit grew 98.3% from the year-ago value to $30.42 million. Also, the company’s net income and net income per common share rose 346.5% and 350% year-over-year to $9.22 million and $0.81, respectively.
The stock has gained 72.5% over the past year, closing the last trading session at $40.48.
MLR’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
MLR has an A grade for Growth and a B for Value and Sentiment. It is ranked #15 in the 59-stock Auto Parts industry.
Click here to access the additional MLR ratings (Quality, Momentum, and Stability).
Stock #1: Modine Manufacturing Company (MOD)
MOD offers engineered heat transfer systems and components tailored for Original Equipment Manufacturer (OEM) vehicular applications in both on- and off-highway settings. The company's operations are divided into two segments, Climate Solutions, and Performance Technologies.
On August 15, MOD unveiled its electric infrared product line, the MEL Series. These commercial-grade high-intensity electric infrared heaters, boasting outputs spanning from 750 to 11,400 watts, feature a meticulously crafted reflector for maximizing radiant heat emission and employ replaceable tungsten elements for rapid heating onset.
This innovative product launch marks MOD's strategic endeavor to broaden its array of energy-efficient and environmentally friendly heating solutions, catering to diverse applications in both commercial and residential settings.
On July 6, MOD announced its acquisition of Napps Technology, renowned for producing air and water-cooled chillers, condensing units, and heat pumps primarily tailored for the K-12 school market and analogous sectors.
The acquisition aligns with MOD's growth strategy, aimed at delivering innovative technologies and systems that effectively address practical customer needs.
For the second quarter that ended June 30, 2023, MOD’s net sales increased 15% year-over-year to $622.40 million. Its adjusted EBITDA grew 90.5% from the prior year’s period to $80.40 million. Furthermore, the company’s net earnings rose 216.8% year-over-year to $45.30 million, while its adjusted EPS stood at $0.85, up 165.6% from the prior year’s period.
The company’s revenue for the fiscal year ending March 2024 is expected to increase 9.2% year-over-year to $2.51 billion. Similarly, analysts expect MOD’s EPS for the current year to come in at $2.89, up 48.1% from the previous year. Also, the company surpassed the consensus EPS estimates in all four trailing quarters.
Over the past year, the stock has gained 229.4%, closing the last trading session at $48.95.
MOD’s positive outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
MOD has a B grade for Growth, Value, Momentum, and Sentiment. It is ranked #14 out of 59 stocks within the same industry.
Click here to access additional MOD ratings for Quality and Stability.
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VLEEY shares were trading at $9.63 per share on Monday afternoon, down $0.22 (-2.23%). Year-to-date, VLEEY has gained 11.03%, versus a 18.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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