Extended COVID-19 lockdowns across several parts of China and the continuing Russia-Ukraine war have strangulated the global supply chain. A scarcity of raw materials and acute labor shortages have been damaging businesses worldwide. However, the Global Supply Chain Pressure Index (GSCPI), a new barometer of global supply chain pressures, points to an easing in global supply chain disruptions since December 2021.
The U.S. Senate recently passed its version of the Ocean Shipping Reform Act (OSRA). If signed into law, this act is expected to help unlock a major supply gridlock in the shipping industry and thereby improve overall logistics. Furthermore, according to FMI, the global supply chain management market is projected to grow at an 11.4% CAGR from 2021 to 2031.
Therefore, if the supply chain environment keeps improving, fundamentally strong stocks Honda Motor Co., Ltd. (HMC), Stellantis N.V. (STLA), and Genuine Parts Company (GPC), which are struggling to increase their output due to the supply constraints, could benefit.
Honda Motor Co., Ltd. (HMC)
Tokyo, Japan-based HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products domestically and internationally. Its four segments are Motorcycle Business; Automobile Business; Financial Services Business; Life creation; and Other Businesses.
On April 5, 2022, General Motors (GM) and HMC announced an agreement to co-develop a series of affordable EVs using next-generation Ultium battery technology. Toshihiro Mibe, HMC’s president & CEO, said, “Honda and GM will build on our successful technology collaboration to help achieve a dramatic expansion in the sales of electric vehicles.”
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 ¥582.10 billion ($5.06 billion), up 31.1% year-over-year. Its operating profit came in at ¥671.6 billion ($5.83 billion), up 50.2% year-over-year.
HMC’s revenue is expected to come in at $128.59 billion for its fiscal period ending March 31, 2023, representing a 13.8% year-over-year rise. In addition, the company’s EPS is expected to increase 13.2% per annum for the next five years. The stock closed yesterday’s trading session at $25.69.
HMC has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Value and a B grade for Stability and Quality. Click here to see HMC ratings for Growth, Momentum, and Sentiment. It is ranked #5 of 69 stocks in the Auto & Vehicle Manufacturers industry.
Click here to check out our Automotive Industry Report for 2022
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA designs, engineers, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems worldwide.
On April 14, 2022, STLA and Qualcomm Technologies, Inc. announced their collaboration to utilize the latest Snapdragon® Digital Chassis advancements for delivering improved and intelligent in-vehicle experiences. Carlos Tavares, STLA’s CEO said, “Qualcomm Technologies’ broad experience in automotive and scale as a semiconductor leader will enable us to vertically integrate key elements of our new platforms and more closely manage the complete electronics supply chain.”
STLA’s net revenues came in at €149.42 billion ($156.71 billion) for the year ended December 31, 2021, up 213.5% year-over-year. Its net profit came in at €14.21 billion ($14.90 billion), up 602.3% year-over-year. And its EPS came in at €4.51, up 236.6% year-over-year.
Analysts expect STLA’s revenue to increase 7.3% year-over-year to $188.50 billion for its fiscal period ending Dec. 31, 2023. Its EPS is estimated to increase 20.1% per annum for the next five years. It surpassed the EPS estimates in three of the trailing four quarters. The stock closed yesterday’s session at $13.29.
STLA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
STLA has an A grade for Value and a B grade for Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #4. Click here to see the additional POWR Rating for Growth, Momentum, Stability, and Sentiment for STLA.
Genuine Parts Company (GPC)
GPC distributes automotive replacement parts and industrial parts and materials. It operates through the Automotive Parts Group and Industrial Parts Group segments. The Atlanta, Ga.-based company serves global customers from an extensive network of more than 10,000 locations in 17 countries.
On April 13, 2022, GPC announced an acquisition of a European Automotive business. Paul Donahue, GPC’s Chairman and CEO, said, “With our entry into Spain and Portugal, we expect to further strengthen Lausan's market-leading position by capitalizing on our European scale and purchasing expertise, as well as leveraging the roll-out of our NAPA brand across this region. We welcome the Lausan team to the GPC and AAG family and are excited to work together to maximize the growth opportunities in our European business.”
For its fiscal 2022 first quarter, ended March 31, 2022, GPC’s net sales came in at $5.29 billion, up 18.6% year-over- year. Its net income was $245.84 million, up 12.9% year-over-year, while its EPS came in at $1.72, up 14.7% year-over-year.
GPC’s revenue is expected to come in at $21.17 billion in 2022, representing a 12.2% year-over-year rise. The company’s EPS is expected to increase 13.3% to $7.83 in 2022. It surpassed EPS estimates in each of the four trailing quarters. Over the past month, the stock gained 4.2% in price to close yesterday’s session at $133.93.
It is no surprise that GPC has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Sentiment and a B grade for Growth, Stability, and Quality.
GPC is ranked #2 of 70 stocks in the Auto Parts industry. Click here to see the additional ratings for GPC (Value and Momentum).
HMC shares were trading at $26.42 per share on Thursday afternoon, up $0.73 (+2.84%). Year-to-date, HMC has declined -7.14%, versus a -9.76% 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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