This should be an interesting end to the year for auto stocks.
First, you’ve got the White House shifting into high gear on President Joe Biden’s push into electric vehicles. Biden announced approval of the first $900 million that will be spent in the U.S. to build EV charging stations throughout 35 states. The effort is all part of the $1 trillion infrastructure bill that was approved late last year.
Then you have the lingering shortage of semiconductors, which are critical for building both EVs and gasoline-powered vehicles. Volkswagen (OTCMKTS:VWAGY) projects that the shortage will continue through the middle of next year.
Throw in record inflation in the U.S., rising interest rates and the ongoing war between Russia and Ukraine, and you’ve got an incredibly dynamic set of factors that will weigh on auto stocks in the fourth quarter.
How do you cut through the mess? Here’s a start, as we look at seven top auto stocks that you should be paying attention to as we head into the final months of 2022.
|GT||Goodyear Tire & Rubber||$10.70|
The Goodyear Tire & Rubber Company (GT)
Until The Jetsons comes to life or until we finally get those cool hoverboards promised to us in Back to the Future, it appears that vehicles will continue to need tires for a long time – no matter how the engines are powered.
The Goodyear Tire & Rubber Company (NASDAQ:GT) traces its history more than 100 years. Its footprint includes manufacturing facilities in 23 countries, and it makes tires under the Sava, Dunlop, Goodyear, Cooper Tires, Fulda, Kelly Tires and Debica brands.
Granted, GT stock is down by 50% so far this year. But the company is also consistently beating analysts’ expectations when it’s time to issue an earnings report.
The most recent report – Q2 2022 – was no different. Revenue of $5.21 billion was better than the $4.98 billion that analysts expected. Earnings per share of 46 cents was 9 cents per share better than the Street expected.
Goodyear could be a company vulnerable to a recession – the American Automobile Association reports drivers are more inclined to put off tire replacements in an economic downturn. But the company’s products will remain in demand – and the buyers will return as the economy improves.
GT stock is on sale these days and has a “C” rating in my Portfolio Grader.
Ford Motor (F)
Legacy American automaker Ford (NYSE:F) is rapidly making the transition to EVs. It boasts a growing lineup of EV models, and it’s committed to selling 600,000 EVs annually by the end of next year.
Ford even has an EV version of its famed F-150 pickup, the F-150 Lightning. The company just announced a price hike as it’s reopening orders for the F-150 Lightning, bumping the price between $6,000 and $8,500 higher and raising the minimum price to $47,000.
Earnings for the second quarter were sterling. Revenue of $37.91 billion was a 56% increase from a year ago, and beat analysts’ expectations of $35.18 billion. EPS of 68 cents per share was better than the 45 cents that analysts predicted.
F stock is down by 45% this year, but it has a “B” rating in the Portfolio Grader.
You can’t call Tesla (NASDAQ:TSLA) a legacy automaker. CEO Elon Musk is far too much of a maverick to be a legacy anything – but that seems to have worked out for Tesla. The EV company is the arguable leader in the space, with a market cap of more than $700 billion that leaves all the other companies in the dust.
TSLA stock down 30% so far on the year, but as I wrote recently, the company will surely rebound in the near future. As EVs become more commonplace and the U.S. rolls out its network of charging stations, Tesla will be even more popular.
Need more convincing? Don’t forget to look at the numbers. Q2 revenue of $16.93 billion matched expectations, and EPS of 76 cents was much better than the 60 cents per share that analysts expected.
TSLA stock has an “A” rating in the Portfolio Grader.
Tata Motors Limited (TTM)
It’s time to diversify your selection of auto stocks. U.S.-based stocks have plenty of headwinds, as discussed. But if you want to look at investing in a group of auto stocks, then India-based Tata Motors (NYSE:TTM) is a tempting target.
Tata Motors got its start nearly 80 years ago as a manufacturer of locomotives. But by the 1990s it was a serious player in passenger vehicles.
Since then, Tata Motors has grown into a company with a market cap of more than $17 billion. Subsidiaries include Jaguar Land Rover, which makes Jaguar and Land Rover vehicles, as well as South Korea’s Tata Daewoo. Tata Motors also has 75% of the EV market in India. Its Nexon EV gets roughly 3,500 orders per month.
While earnings have been a disappointment (TTM missed on both top- and bottom-line fiscal Q1 2023 numbers) there’s significant potential here, particularly as some of the headwinds facing EV stocks begins to clear.
TTM stock has a “B” rating in the Portfolio Grader.
LKQ Corporation (LKQ)
Based in Chicago, LKQ Corporation (NASDAQ:LKQ) is a specialty parts provider for vehicles, specializing in salvage and recycled auto parts. That’s particularly important as people are holding onto the vehicles longer than ever these days.
LKQ bills itself as the largest provider of what it calls “alternative vehicle collision replacement products.”
While that paints a picture of gasoline-powered combustion engines, LKQ is gearing up for the EV evolution. According to the company, EVs have fewer components than cars powered by a combustion engine, and therefore have lower servicing costs. So, if people are going to invest big bucks in an electric vehicle, they theoretically have a greater opportunity to keep it for longer periods of times because the repairs should be easier.
Last year, LKQ bought a North Carolina company, Green Bean Battery, that repurposes EV batteries.
LKQ stock is down 19% so far this year, but its earnings over the last 12 months have nearly always beat on both top and bottom lines. The only exception was in the second quarter, in which LKQ missed revenue estimates of $3.39 billion by posting $3.34 billion. But even then, it topped EPS projections by 7 cents per share by posting $1.09.
LKQ stock has a “B” rating in the Portfolio Grader.
If you want to hold on to your car for a long time and want to keep it looking in too shape, then XPEL (NASDAQ:XPEL) may be the answer you’re looking for among auto stocks. The Texas-based company is known for its protective films and coatings, including automotive paints. It also provides products for vehicle wraps, window tinting and ceramic coating. For the interior, its products include antimicrobial film for touch screens, displays and other surfaces.
In July, it was reported that BlackRock (NYSE:BLK) the investment managing firm, purchased a 10% stake in XPEL.
For the second quarter, XPEL announced revenue of $83.89 million, which beat analysts’ expectations for $78.55 million. Earnings of 43 cents per share also topped expectations of 34 cents per share.
Despite an up-and-down 2022, XPEL stock is down by only 5% on the year. And it has a “B” rating in the Portfolio Grader.
Lucid Group (LCID)
It hasn’t all been roses for Lucid Group (NASDAQ:LCID) stock. Down a whopping 60% so far this year, Lucid has failed – so far – to mount a serious challenge to Tesla.
But, as I wrote recently, there’s plenty of reason to like Lucid stock, particularly given the superior design and positive reviews the EVs are getting.
On top of that, Lucid’s batteries seem to be superior to Tesla’s, with R.F. Lafferty analyst Jamie Perez calling it a “key differentiator” between the two companies. Perez set a $19 price target and issued a “buy” rating.
But revenues remain minimal for now as the company has slashed production projections as it tries to get off the floor. Revenue for the second quarter was only $97.34 million, or 38% less than the $157.12 million that the Street expected. The company also posted a loss of 33 cents per share, which was worse than the 31-cent loss that analysts projected.
Currently LCID stock has a “C” rating in the Portfolio Grader, but it needs more production before it mounts a serious challenge to Tesla.
On the date of publication, Louis Navellier held a position in F stock. He did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article held a position in TSLA stock. The Research Staff member did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.