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5 Auto Stocks Poised to Continue Their Winning Streaks in 2022

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There were a lot of hopes for the automotive sector this year, following the economic downturn unleashed by the COVID-19 pandemic and ensuing lockdowns in 2020. While the auto industry in 2021 managed to recover from the pandemic-induced economic havoc, the recovery path was not as smooth as predicted.

In 2021, global auto sector growth did roar back with a demand for new vehicles buoying as personal vehicles became one of the safest ways to travel during the pandemic. However, this gained traction was soon lost. The rebound to the overall vehicle production and sales in 2021 was bumped by several factors that depressed vehicle markets — particularly in the second half of the year. A global dearth in semiconductor supply and the subsequent supply chain crisis as well as an increase in commodity prices were some of the complexities that diminished the revival of the auto sector. This was further compounded by the lumpy progress of vaccination strategies globally and the emergence of new COVID-19 variants (notably in Southeast Asia).

The Auto, Tires and Trucks sector increased 9.5% year to date compared with the S&P 500 Index’s growth of 26.9%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research


All of that said, 2021 was a massive year for electric vehicles (EVs). Despite the disruption caused by the pandemic, the EV market demonstrated its robust nature and was able to boom. With legacy automakers revving up their electrification efforts, EV sales in 2021 surged, with growth being witnessed in all three top auto markets— China, the United States and Europe. The U.S. EV industry got a massive boost this November, with President Joe Biden’s infrastructure bill being passed. This earmarked $7.5 billion to kick off Biden’s goal to build a national EV charging network of 500,000 chargers by 2030.

How Will 2022 Shape Up for Auto Companies?

After a bumpy 2021, the automotive sector aspires for a smooth ride in 2022. Global auto industry conditions are predicted to potentially improve in 2022, with demand recovering further and supply chain challenges gradually easing. Semiconductor availability is also predicted to rise on a sequential basis through 2022.

The year 2021 marked a significant shift toward electric transportation. Moreover, 2022 is expected to be bigger, given the growing appetite for zero-emission cars worldwide. Per a research report by Fortune Business Insights, the global electric vehicle market is anticipated to grow from $287.36 billion in 2021 to $1,318.22 billion in 2028, witnessing a CAGR of 24.3% from 2021 to 2028. Automobile manufacturers are also keen on adopting new technologies in the electric mobility space, which is expected to witness a series of new options in both four- and two-wheeler categories in the upcoming year.

After a choppy year, the auto sector enters 2022 with a hopeful mindset to attain improved sales volume as the worst phase of the global chip shortage seems to be over. Per the latest Earnings Trends report, the auto sector is expected to see year-over-year earnings growth of 13.2% in 2022, with the top line expected to be up 16%.

5 Auto Stocks Set to Fly High Next Year

Amid this encouraging scenario, we have handpicked five auto stocks, which are set to perform well in 2022 and backed by a Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks have gained more than 20% so far this year, with a market capitalization of more than $1 billion and are witnessing positive revisions of late. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesla TSLA: Tesla is a leading zero-emission transportation provider globally. With the company’s flagship Model 3 accounting for about half of the U.S. EV market, Tesla has become a dominant player in the EV segment. Along with Model 3, Model Y is also boosting Tesla’s prospects. With China being the biggest EV market, Tesla’s Shanghai factory is buoying the company's top line. Along with increasing automotive revenues, the firm’s energy generation and storage revenues are bolstering Tesla’s ambitions. The auto bigwig recently made headlines as it entered the elite $1-trillion club, achieving another historic milestone. It currently has a market capitalization of $1,071.55 billion.

TSLA currently flaunts a Zacks Rank #1. The Zacks Consensus Estimate for next year’s earnings is pinned at $7.80 per share, having moved up 9 cents in the past 60 days. The consensus mark suggests a year-over-year rise of 30.49%. The stock has rallied 51.2% in the year-to-date period.

The Goodyear Tire & Rubber Company GT: Goodyear is one of the largest tire manufacturing companies in the world. Goodyear sells tires, undertakes automotive repairs and provides other services. Goodyear’s acquisition of Cooper Tire, which closed in June 2021, strengthened the firm's leadership position in the global tire industry. The buyout of Raben Tire also expanded its network and solidified its ability to serve fleets. Goodyear’s TireHub joint venture with Bridgestone bodes well for its long-term prospects. GT also secured a leadership position in electric mobility space through developing tires that will help automakers transform their portfolios to more energy-efficient and eco-friendly vehicles.

Goodyear Tire has a market capitalization of $5.93 billion. Shares of this Zacks Rank #1 company have appreciated 93.1% year to date. The Zacks Consensus Estimate for 2022 earnings has been revised 72 cents upward in 60 days to $2.77 per share, suggesting a year-on-year increase of 49.91%.

Standard Motors Products SMP: Long Island City, NY-based Standard Motor is one of the leading manufacturers, distributors and marketers of premium automotive replacement parts for engine management and temperature control systems. It primarily focuses on heavy-duty industrial and the original equipment market. The company enjoys a strong competitive advantage due to brand recognition and a sizeable customer base. The Pollak business buyout and the acquisition of the particulate matter sensor product line from Stoneridge have buoyed the company’s future prospects. SMP’s unlevered balance sheet gives it enough financial flexibility to tap on growth opportunities.

Shares of this Zacks Rank #1 company have appreciated 28.2% year to date. It has a market capitalization of $1.14 billion. The Zacks Consensus Estimate for 2022 earnings has been revised 32 cents upward in 60 days to $4.42 per share, suggesting a year-on-year increase of 5.49%.

LKQ Corporation LKQ: LKQ is one of the leading providers of replacement parts, components and systems that are required to repair and maintain vehicles. The company distributes aftermarket collision and mechanical products, recycled collision and mechanical products, bumper covers and lights as well as remanufactured engines and transmissions. LKQ’s strategic acquisitions are boosting its prospects. The buyouts of Elite Electronics, Green Bean Battery and Fabtech Industries have bolstered the firm’s product offerings as well as sales. The company’s efforts to maintain a strong balance sheet with low leverage and high liquidity will also stoke growth.

The Zacks Consensus Estimate for next year’s earnings is currently pegged at $4, suggesting a year-over-year hike of 3.33%, having witnessed northbound revision of 15 cents in the past 60 days. This Zacks Rank #2 company has a market capitalization of $16.83 billion. LKQ has appreciated 63.8% so far this year.

Genuine Parts Company GPC: Based in Atlanta, GA, Genuine Parts distributes automotive and industrial replacement parts and materials and business products across the globe. The company’s strategic acquisitions to improve product offerings and expand its geographical footprint is commendable. Genuine Parts’ decision to acquire Kaman Distribution Group (“KDG”) in a $1.3-billion all-cash deal, which is expected to close in first-quarter 2022, is expected to bolster its scale and market position while creating fresh opportunities for long-term growth, profits and cash flow. The company anticipates the buyout to be accretive to earnings in the first year after closing of the transaction and achieve $50-million annual run-rate synergies over three years. Genuine Parts’ growing omnichannel capabilities, robust buyback program and steady dividend growth boost investors’ confidence.

Genuine Parts’ shares have appreciated 34.8% so far this year. The Zacks Consensus Estimate for GPC’s 2022 EPS has moved up 14 cents in the past 60 days to $7.32, indicating year-over-year growth of 9.07%. This Zacks Rank #2 company has a market capitalization of $19.28 billion.

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Zacks Investment Research

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Genuine Parts Company (GPC) : Free Stock Analysis Report

The Goodyear Tire & Rubber Company (GT) : Free Stock Analysis Report

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Tesla, Inc. (TSLA) : Free Stock Analysis Report

LKQ Corporation (LKQ) : Free Stock Analysis Report

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