3 Auto Manufacturers Outperforming the Market in 2022

The U.S. markets have been highly volatile amidst worse-than-expected inflation reports released last month and rising geopolitical tensions. In addition, with the ongoing global semiconductor chip shortage, the auto manufacturing industry could face challenges aplenty in the coming months. However, despite sky-high prices, the strong demand for both used and new cars has helped the sector outperform the broader markets. According to Group 1 Automotive CEO Earl Hesterberg, “demand for used cars remains strong.”

Furthermore, with a potential economic rebound in the near term, investors are clinging to promising outlooks offered by popular auto manufacturing giants with robust financials, irrespective of the logistical disruptions.

Therefore, we think it could be wise to add fundamentally strong auto manufacturing stocks Toyota Motor Corporation (TM), Honda Motor Co., Ltd. (HMC), and Tata Motors Limited (TTM) to one’s portfolio. These stocks have outperformed the benchmark S&P 500 index’s 7.3% decline year-to-date.

Toyota Motor Corporation (TM)

Tokyo-based 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 Feb. 7, 2022, Fukuoka City and TM signed a partnership agreement with the early realization of a hydrogen society in mind. The partnership is expected to help the company achieve its sustainability goals for better business in the future.

For nine months ended Dec. 31, 2021, TM’s total sales revenues came in at ¥23.27 trillion ($202.09 billion), up 19.2% year-over-year. Its net income was ¥2.38 trillion ($20.71 billion), up 59.1% year-over-year. Also, its EPS came in at ¥166.45, up 60% year-over-year.

TM’s EPS is expected to increase 23% per annum over the next five years. The stock has gained 4% in price year-to-date to close Friday’s trading session at $192.71.

Honda Motor Co., Ltd. (HMC)

Tokyo-based HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and others domestically and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and  Life creation, and Other Businesses.

On Jan. 20, 2022, HMC announced its investment in the U.S. (California)-based Helm.ai to strengthen its software technology development. The move is expected to diversify its product portfolio and boost its prospects.

For the nine months ended Dec. 31, 2021, HMC’s sales revenue increased 11.8% year-over-year to ¥10.68 trillion ($92.74 billion). The company’s profit for the period came in at ¥582.1 billion ($5.06 billion), up 31.1% year-over-year. And its operating profit was  ¥671.6 billion ($5.83 billion), up 50.2% year-over-year.

HMC’s revenue is expected to be  $34.62 billion for its fiscal year ending March 31, 2022, representing a 4.5% year-over-year rise. In addition, the company’s EPS is expected to increase 13.2% per annum over  the next five years. The stock has gained 7.1% in price to close Friday’s trading session at $30.46.

Tata Motors Limited (TTM)

Headquartered in Mumbai, India, TTM designs, develops, manufactures, and sells a range of automotive vehicles. It operates in India, China, the United States, the United Kingdom, the rest of Europe, and internationally.

On Jan. 31, 2022, Girish Wagh, Executive Director, TTM, said, “The auto industry continued to witness rising demand in most segments even as the supply of semiconductors remained restricted resulting in adverse impact on production. At Tata Motors, our agility in both planning and execution, helped optimize production to deliver another strong quarter with accelerated sales.”

TTM’s revenue increased 22% in price sequentially to £4.7 billion ($6.35 billion) for its fiscal 2022 third quarter, ended Dec. 31, 2021. Its wholesale performance (including exports) increased 30.4% to 200,212 units. And its production volumes came in at 72,184 units, up 41% sequentially.

TTM’s revenue is expected to increase 22.2% to $3.35 billion in March 2022. And its EPS is expected to increase 6.9% per annum for the next five years. The stock has gained marginally in price year-to-date to close Friday’s trading session at $32.20.

TM shares fell $3.60 (-1.87%) in premarket trading Monday. Year-to-date, TM has gained 2.27%, versus a -7.36% rise in the benchmark S&P 500 index during the same period.

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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