Auto Sales Comeback Produces Winners and Losers Among Car Maker Stocks

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U.S. car and light truck sales rose more than 13% last year, continuing a post-recession rebound that has seen sales rise more than 30% over the past two years. Alas, the two publically traded U.S. automakers, General Motors (GM) and Ford (NYSE:F) haven’t seen much of that upside.

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GM clocked in with just 4% sales growth for the year according to Motor Intelligence, and Ford’s sales inched forward 5%. Among U.S. manufacturers, only Chrysler shone, with a 20% pick up in sales, but that’s not worth much to investors, as the company remains a subsidiary of Italian car maker Fiat.

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Going forward, U.S. light (cars and small trucks) auto sales are expected to ease off the accelerator in 2013. Polk forecasts 15.3 million new car sales for the year, a 6.6% pickup. The expectation is that we won’t crack the 16 million mark until 2015, which would mean a 9-year trek just to get back to what was “normal” pre-crash.

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(That 2005 blip above 20 million is to be tossed out; it was anything but normal, fueled by the housing and credit boom that made it all too easy to use a home equity line of credit to buy a new car.)

With Ford and GM failing to grab a big piece of sales, the market share winners are obviously Japan and Germany. Volkswagen (which includes the namesake iconic brand, as well as Porsche, Audi and Bentley) saw its U.S. sales jump 30% last year. Toyota (TM) and Honda (HMC) began to rebound from the 2011 manufacturing disruption caused by the devastating earthquake, with sales gains of 27% and 24% respectively. In terms of market share, GM’s market share slid from 19.6% in 2011 to 17.9% last year. Chrysler’s U.S. market share rose from 10.7% to 11.4% and Toyota began to claw back what it lost from the earthquake disruption, with a rebound to 14.4% of market share, up from 12.9% in 2011. (Volkswagen remains a smaller fry in the U.S. market despite its strong 2012: total market share is now 4% up from 3.4% a year ago.)

Toyota stock rallied more than 40% over the past 12 months, as seen in a stock chart, well ahead of the 27% gain in the Nikkei 225, while Honda advanced 17%. Both automakers have had significant jumps since Japan’s mid-December national elections.

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The newly elected Liberal Democrat Party pushed forward on a platform of economic reform designed to give more than lip service to jumpstarting the moribund economy. Bringing down the value of the yen is one of the key components to help boost export competitiveness. The yen has fallen 3% versus the dollar, and 4% against the euro since the election, and is down more than 10% against both currencies over the past three months. Continued yen weakness would be a nice draft for the Japanese automakers to ride.

For investors, the recent price run-up in Toyota hasn’t pushed the valuation needle much. While Toyota’s earnings have rebounded from its post-earthquake lows, and now stand higher than even before the global recession, the stock’s PE ratio remains low.

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That’s no doubt been partly a function of the lingering litigation related to the sudden-acceleration problem that causes Toyota to recall 14 million cars in 2009 and 2010.

In late December, Toyota announced it had reached a preliminary settlement in the U.S. to compensate owners for the loss of value to their recalled cars. (Lawsuits claiming injury or death related to the sudden-acceleration problem are separate, and will begin litigation in the coming months.) Toyota announced it plans to take a $1.1 billion one-time charge against earnings to cover the settlement costs. For the most recent 12 months, Toyota had earnings before interest and taxes (EBIT) of more than $13.5 billion. Since that settlement was announced Toyota’s stock price is up 4.3%, compared to 2.8% gains in both the Nikkei and the S&P 500.

Carla Fried, a senior contributing editor at ycharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money Magazine. She can be reached at editor@ycharts.com.

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