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5 Stocks to Watch as Auto Sales Look Set for a Rebound

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Zacks Equity Research
·4 min read
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The auto industry had to bear the brunt of the COVID-19 pandemic in 2020 as lockdowns led to a fall in demand. However, the industry looks poised to rebound this year. Notably, per a report by IHS Markit, global light vehicle sales are expected to increase 9% in 2021, as industry demand levels spur up. The report stated that the recovery will depend on the path of the pandemic and how governments are delivering on the vaccine programs. Also, the IHS Markit report hints at normalization of the situation from the middle of 2021.

On a positive note, the report stated that online sales and contactless delivery programs have helped in offsetting the impact of restrictions on registrations. The report also stated that the production of light vehicles is expected to rebound globally as manufacturing operations have been largely restored in most regions. Notably, IHS Markit forecast global light vehicle production to increase 14% in 2021.

In the United States, auto makers have been making a comeback from the second half of 2020. S&P Global Ratings stated that factors like ultra-low interest rates, low gas prices and strong housing starts, which have a historical correlation to auto sales, helped in boosting demand and in lowering sales incentives for auto makers, as quoted in an American Journal of Transportation article. The article also stated that shifting away from public transportation along with a flight to suburbs during the pandemic contributed to the demand for vehicles.

Meanwhile, electric vehicles (“EVs”) are also set to gain further importance in the auto industry as the world continues to fight climate change. Notably, Canalys stated that global sales of EVs increased 39% in 2020, to reach 3.1 million units, as mentioned in a Business Wire article. Moreover, the article stated that EVs are estimated to account for more than 7% of worldwide new car sales in 2021 compared to almost 5% in 2020.

5 Stocks to Watch Out for

The auto industry looks set to make a comeback in 2021 as demand for vehicles gradually recover. Moreover, EVs should gain more prominence as consumers continue to shift to this clean energy alternative. This makes it a good time to look at auto manufacturers that can make the most of this potential upswing. Notably, we have selected five such stocks that carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tesla, Inc. TSLA designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, Netherlands, Norway, and internationally. The Zacks Consensus Estimate for its current-year earnings increased 16.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 81.3%.

Ford Motor Company F designs, manufactures, markets, and services a range of Ford trucks, cars, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles worldwide. The company has also forayed into the EV space with models like the 2021 Mustang Mach-E and 2020 Fusion Hybrid. The Zacks Consensus Estimate for its current-year earnings increased 30.5% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

Honda Motor Co., Ltd. HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. The company is also venturing into the EV space with offerings like the Honda e. The Zacks Consensus Estimate for its next-year earnings increased 2.8% over the past 60 days. The company’s expected earnings growth rate for next year is 46.2%.

Toyota Motor Corporation TM designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories. The Zacks Consensus Estimate for next-year earnings increased 3.2% over the past 60 days. The company’s expected earnings growth rate for next year is 35.5%.

General Motors Company GM designs, builds, and sells cars, trucks, crossovers, and automobile parts worldwide. The Zacks Consensus Estimate for its current-year earnings increased 3.7% over the past 60 days. The company’s expected earnings growth rate for the next five years is 9.9%.

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