Buy, Hold or Sell: Ford Motor (F) and Nissan Motor (NSANY)?

The automobile industry seems well-equipped to navigate market fluctuations, thanks to its embrace of technological advancements and changing consumer preference toward electric and autonomous vehicles. Given the backdrop, we look into the fundamentals of Ford Motor Company (F) and Nissan Motor Co., Ltd. (NSANY).

Before delving into the fundamentals of the featured stocks, let's look at a few key factors propelling the growth in the automobile industry.

The automotive industry is expected to achieve a value of $6.07 trillion, exhibiting a CAGR of 6.9% by the year 2030. The worldwide automotive sector has recently shown significant advancement, driven primarily by the swift urbanization occurring on a global scale.

Factors such as industrial expansion, population growth, infrastructure development, job opportunities, e-commerce surge, rising commercial vehicle demand, and advanced freight vehicle requirements are poised to further drive market growth.

Moreover, the global demand for Electric Vehicles (EVs) is increasing due to heightened environmental awareness, government incentives, and advancements in EV technology. A growing multitude of consumers are expressing interest in EVs because of their innovative features.

For instance, in the U.S. market alone, the revenue from EV sales is expected to surge to around $70.10 billion by 2023. On top of it, a robust CAGR of 18.2% is forecasted to result in a market volume of $161.60 billion by 2028. Furthermore, revenue from EV sales in the global market is expected to grow at a 10.1% CAGR to a projected market volume of $906.70 billion by 2028.

Considering the aforementioned backdrop, the outlook for the automobile industry seems bright, presenting significant prospects in the years ahead. To that end, it could be wise to take a bullish stance on the fundamentally sound stock NSANY. However, considering the mixed fundamentals of Ford, it could be wise to monitor this stock for a better entry point.

Stock to Hold:

Ford Motor Company (F)

F develops, delivers, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide. It operates through Ford Blue; Ford Model e; Ford Pro; Ford Next; and Ford Credit segments. 

On August 1, following a six-week pause, F recommenced the production of the F-150 Lightning. This hiatus was utilized to enhance and reconfigure the Rouge Electric Vehicle Center facility, with the aim of tripling the manufacturing capacity for the award-winning electric truck.

As a result of this expansion, F will be empowered to manufacture the F-150 Lightning at a projected annualized rate of 150,000 units by the approaching autumn season.

On July 11, F declared a regular quarterly dividend of $0.15 per share on its outstanding common and Class B stock, payable to its shareholders on September 1.

The company’s annual dividend of $0.60 translates to a 5.05% yield on the prevailing prices, while its four-year average dividend yield is 4.34%. Its dividend payouts have grown at an 18.6% CAGR over the past three years.

F’s trailing-12-month CAPEX/ Sales of 4.43% is 37.8% higher than the 3.22% industry average. However, the stock’s trailing-12-month gross profit margin of 10.34% is 70.8% lower than the 35.41% industry average.

In the fiscal second quarter, which ended June 30, 2023, F’s total revenues increased 11.9% year-over-year to $44.95 billion, while its net income and EPS rose 187.4% and 193.6% from the year-ago values to $1.92 billion and $0.16, respectively.

However, during the same period, the company’s total current liabilities amounted to $101.02 billion, up 4.3% compared to $96.87 billion as of December 31, 2022.

Street expects F’s revenue for the fourth quarter (ending December 2023) to increase 3.9% year-over-year to $43.41 billion. Whereas its EPS for the same quarter is expected to decline 49% year-over-year to $0.26. However, the company topped its EPS estimates in three of the trailing four quarters.

The stock slumped 17.3% over the past year but gained 2.1% over the past three months to close the last trading session at $11.87.

F’s POWR Ratings are consistent with this uncertain outlook. It has an overall rating of C, translating to Neutral in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.

It has a C grade for Momentum, Stability, Sentiment, and Quality. It is ranked #27 out of 56 stocks in the Auto & Vehicle Manufacturers industry. To see F’s ratings for Growth and Value, click here.

Stock to Buy:

Nissan Motor Co., Ltd. (NSANY)

Headquartered in Yokohama, Japan, NSANY manufactures and sells vehicles and automotive parts worldwide under the Nissan and Infiniti brands. The company offers vehicle and vehicle parts, engines, manual transmissions, automotive parts, axles, and other related components.

On August 8, NSANY introduced the Skyline NISMO and the Skyline NISMO Limited models for the Japanese market. The Skyline NISMO, representing the epitome of the Skyline GT brand, will have a production cap of 1,000 units, with its market release scheduled for early September.

Additionally, the Skyline NISMO Limited variant, which is a more exclusive offering, is set to have a production run of only 100 vehicles and is expected to be launched in the upcoming summer.

On July 26, NSANY affirmed its plan to act as a strategic investor in Ampere, Renault Group's newly established entity focused on EVs and software in Europe. In line with this commitment, NSANY pledged an investment of up to €600 million ($652.74 million) in Ampere, signifying its strategic involvement and enabling it to secure a position on Ampere's board.

This financial involvement harmonizes with NSANY's strategy for electrification, opening up avenues for various advantages and cooperative opportunities in Europe and potentially other markets as well.

The stock’s trailing-12-month CAPEX/Sales of 11.19% is 247.9% higher than the 3.22% industry average. Also, its trailing-12-month cash per share of $2.89 is 24.2% higher than the $2.33 industry average.

For the fiscal first quarter, which ended on June 30, 2023, NSANY’s net sales increased 36.5% year-over-year to ¥2.91 trillion ($19.95 billion). Its gross profit grew 46.2% from the year-ago value to ¥497.66 billion ($3.41 billion).

In addition, the company’s net income amounted to ¥110.87 billion ($759.96 million), up 111.7% from the prior-year quarter, while its operating income improved 98.1% year-over-year to ¥128.59 billion ($881.42 million).

The consensus revenue estimate of $85.43 billion for the fiscal period (ending March 2024) represents an 85.4% increase year-over-year. The consensus EPS estimate of $1.39 for the same period indicates a 65.4% improvement year-over-year. Moreover, the company has an excellent surprise history, surpassing the revenue estimates in each of the trailing four quarters.

NSANY’s shares have gained 30.3% year-to-date to close the last trading session at $8.18

NSANY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system.

It also has an A grade for Growth and Value. Within the same industry, it is ranked #18. Click here to see the other ratings of NSANY’s for Momentum, Stability, Sentiment, and Quality.

43 Year Investment Pro Shares Top Picks

Steve Reitmeister is best known for his timely market outlooks & unique trading plans to stay on the right side of the market action. Click below to get his latest insights…  

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F shares were trading at $11.92 per share on Wednesday afternoon, up $0.05 (+0.42%). Year-to-date, F has gained 11.52%, versus a 16.56% rise in the benchmark S&P 500 index during the same period.

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