Despite the pandemic challenges, the U.S. auto industry rebounded last year. Moreover, U.S. new vehicle sales rose in the third quarter, demonstrating robust demand in the industry. Therefore, I think quality auto stocks Wabash National Corporation (WNC), Renault SA (RNLSY), and REV Group, Inc. (REVG) could be wise additions to one’s portfolio.
According to data released by Wards Intelligence, U.S. new vehicle sales in September were 1.33 million units, with an annual sales rate of 15.67 million units.
Moreover, the International Energy Agency (IEA) anticipates electric vehicle (EV) sales in 2023 will experience a substantial 35% year-over-year increase, reaching around 14 million units.
This remarkable growth trajectory indicates that EVs are poised to capture an even more significant portion of the overall automotive market, expectedly approaching an 18% market share by the end of 2023.
In addition, the widespread adoption of cutting-edge digital technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), and blockchain is profoundly reshaping manufacturing processes within the automotive industry.
Considering these conducive trends, let’s look at the fundamentals of the three best Auto & Vehicle Manufacturers stocks, starting with number 3.
Stock #3: Wabash National Corporation (WNC)
WNC specializes in providing connected solutions for the transportation, logistics, and distribution industries in the United States. They operate in two segments: Transportation Solutions, which manufactures trailers and specialised bodies, and Parts & Services, offering aftermarket parts and services for vehicles. Wabash National serves a broad customer base and distributes products under various brand names.
On September 18, 2023, WNC announced a multi-year agreement with Rockland Flooring, a long-term WNC supplier and multiple award winner for laminated wood trailer flooring. Rockland Flooring will collaborate with WNC to optimise the supply chain and promote innovation and continuous improvement.
This agreement ensures a stable supply of wood flooring, a crucial material in the trailer industry. It aligns the companies to better serve the future needs of their mutual customers in transportation. This agreement is part of WNC's strategic approach to meet long-term customer demand.
During the nine months that ended September 30, 2023, WNC’s net sales rose 5.2% year-over-year to $1.94 billion. Its adjusted income from operations increased 130.3% from the previous-year period to $250.85 million. Moreover, the company’s adjusted net income and EPS rose 155.5% and 161.5% year-over-year to $180.87 million and $3.74.
Street expects WNC’s EPS for the fiscal third quarter ending December 2023 to rise 1.8% year-over-year to $0.86. Its revenue is expected to be to $633.20 million in the same quarter. The company topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has soared 21.88% over the past year to close the last trading session at $20.50.
WNC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
WNC has an A grade for Value and a B grade for Quality. Within the B-rated Auto & Vehicle Manufacturers, it is ranked #16 among 52 stocks.
Click here to see WNC’s additional POWR Ratings for Growth, Stability, Sentiment, and Momentum.
Stock #2: Renault SA (RNLSY)
Based in France, RNLSY is a global automobile company that designs, manufactures, sells, and leases vehicles and produces vehicle parts. The company operates through three segments: Automotive (manufacturing and sales of vehicles); Sale Financing (offering financing and leasing services); and Mobility Services (providing mobility and energy solutions for electric vehicle users). Renault's brands include Renault, Dacia, Alpine, and Mobilise.
On October 6, RNLSY announced that the company and Volvo Group had agreed to form a new company to create electric vans to meet the demand for sustainable logistics. They plan to welcome CMA CGM into the venture and are open to more investment and partnerships. The company will produce a new line of electric, software-defined vehicles, with production scheduled for 2026.
RNLSY’s group revenues for the six months ended June 29, 2023, increased 27.3% year-over-year to €26.85 billion ($28.41 billion). Its operating income increased 127.1% year-over-year to €2.10 billion ($2.22 billion). The company’s net income, Group share came in at €2.09 billion ($2.21 billion), compared to a net loss of €1.37 billion ($1.45 billion) in the year-ago period.
Moreover, its free cash flow increased 85.7% year-over-year to €1.78 billion ($1.88 billion).
RNLSY’s revenue is expected to rise 14.8% year-over-year to $56.85 billion in the fiscal year 2023. Moreover, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has soared 7.6% over the past year to close the last trading session at $6.81.
RNLSY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
RNLSY has an A grade for Growth and Value and a B for Stability. Within the same industry, it is ranked #12.
In addition to the POWR Ratings stated above, one can see RNLSY’s additional POWR Ratings for Sentiment, Momentum, and Quality here.
Stock #1: REV Group, Inc. (REVG)
REVG is a major specialty vehicle designer and manufacturer with three segments: Fire & Emergency; Commercial; and Recreation. The company creates custom vehicles for public services, commercial use, and leisure. The company has a diverse portfolio of established brands with over 50 years of industry history.
On September 25, 2023, REVG announced that it had a successful show at America's Largest RV Show in Hershey, Pennsylvania, held from September 13 to 17, 2023. During the event, customers could order and purchase units from various well-known brands, including Fleetwood RV, Holiday Rambler, American Coach, Renegade RV, Midwest Automotive Designs, and Lance.
Mike Lanciotti, the President of REV Recreation Group, expressed “We had an excellent show at Hershey. The teams reported positive consumer feedback for our new floor plans and innovation across the brands” “Hershey is a great lead into Open House in Elkhart. We’re looking forward to sitting down with our dealers and discuss how to keep the momentum strong.”
The company pays an annual dividend of $0.20, which translates to a yield of 1.36% on the current market price. It has a four-year average dividend yield of 1.51%. The company has raised its dividend at a CAGR of 10.1% over the past three years.
In the fiscal third quarter that ended July 31, 2023, REVG’s net sales stood at $680 million, up 14.3% year-over-year. Its gross profit grew 18.3% from the year-ago quarter to $80.20 million. Moreover, its adjusted net income and adjusted net income per common share stood at $20.90 million and $0.35, up 46.2% and 45.8% from the same period last year, respectively.
Analysts expect REVG’s revenue for the fiscal fourth quarter ending October 2023 to rise 6.8% year-over-year to $666.13 million. Its EPS is expected to increase by 21.4% year-over-year to $0.34. The company topped the consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has soared 37.1% over the past six months to close the last trading session at $14.76.
REVG’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
REVG has a B grade for Growth, Value, Stability and Quality. Within the same industry, it is ranked #3.
To see REVG’s additional POWR Ratings for Sentiment and Momentum, click here.
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RNLSY shares were trading at $6.68 per share on Thursday afternoon, down $0.14 (-1.98%). Year-to-date, RNLSY has gained 1.42%, versus a 9.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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