Historically high inflation and inventory shortage have largely decelerated production in the automotive industry. Recently, Cox Automotive cut its full-year forecast for new-vehicle sales in the United States to 14.40 million units, down from its earlier forecast of 15.30 million.
However, demand remained robust for vehicles in the country, especially electric ones. According to Recurrent, interest in buying an electric vehicle has soared 70% since January.
On the other hand, new vehicle prices are soaring, fueled by the pent-up consumer demand, low vehicle inventories, and rising sales. The average transaction price of a new vehicle in June was $48,083, higher than the previous high of $47,202 set in December.
Given this backdrop, fundamentally-sound automotive stocks Honda Motor Co., Ltd. (HMC) and Isuzu Motors Limited (ISUZY), which are rated Strong Buy in our proprietary POWR Ratings system, could be solid investments to rev up your portfolio.
Honda Motor Co., Ltd. (HMC)
Japan-based HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and others domestically and internationally. Its four segments are Motorcycle Business; Automobile Business; Financial Services Business; Life creation; and Other Businesses.
On April 5, 2022, HMC and General Motors (GM) agreed to co-develop a series of affordable EVs with the help of next-generation Ultium battery technology. In the face of rising EV demand, this venture is expected to benefit the companies significantly.
For the fiscal year ended March 31, 2022, HMC’s sales revenue came in at ¥14.55 trillion ($105.05 billion), up 10.5% year-over-year. Its profit before taxes came in at ¥1.07 trillion ($7.72 billion), up 17.1% year-over-year, while its profit for the year came in at ¥707 billion ($5.10 billion), up 7.5% year-over-year.
HMC’s revenue is expected to come in at $120.17 billion in March 2023, representing a 349.9% year-over-year rise. In addition, the company’s EPS is expected to increase 26.6% year-over-year to $3.47 for the same period. The stock has lost marginally over the past month to close the last trading session at $24.62.
HMC's overall A rating equates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Stability, Sentiment, and Quality. Click here to see HMC’s ratings for Growth and Momentum as well. It is ranked first among 65 stocks in the Auto & Vehicle Manufacturers industry.
Isuzu Motors Limited (ISUZY)
Headquartered in Tokyo, Japan, ISUZY manufactures and sells commercial vehicles, light commercial vehicles, and diesel engines and components worldwide. Its products include heavy and medium-duty trucks and buses, and light-duty trucks; passenger pickup vehicles, pickup trucks, tractors, and sport utility vehicles; and marine and industrial engines.
For the fiscal year 2022, ISUZY’s sales came in at ¥2.51 trillion ($18.15 billion), up 31.8% year-over-year. Its ordinary income came in at ¥208.40 billion ($1.50 billion), up 100% year-over-year, while its net income came in at ¥126.20 billion ($910 million), up 195.6% year-over-year.
ISUZY’s revenue is expected to come in at $21.52 billion in March 2023, representing a 150.3% year-over-year rise. Over the past month, the stock has lost 9.6% to close the last trading session at $10.55.
It’s no surprise that ISUZY has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Value and a B for Stability, Sentiment, and Quality.
ISUZY is ranked #2 in the same industry. Click here for the additional POWR Ratings for ISUZY (Growth and Momentum).
HMC shares were trading at $24.86 per share on Monday morning, up $0.24 (+0.97%). Year-to-date, HMC has declined -11.38%, versus a -17.61% 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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