Auto parts makers are among the best performing stocks in the automotive sector today. But with automotive demand growth expected to lag for the foreseeable future, which auto component makers stand to benefit from this challenging environment? Automotive component suppliers are companies that provide essential parts to car manufacturers, such as engines, transmissions and chassis. They also sell auto parts directly to consumers as aftermarkets and service providers. The automotive components industry is fragmented and competitive, with many small and medium-sized companies supplying different components. As a result, some of these vendors have significant competitive advantages, while others are at risk of being replaced by new technologies. In this article, we’ll be looking at some of the best automotive component stocks to buy now and in 2022.
Magna International (MGA)
Headquarters: Ontario, Canada Market capitalization: $52 billion shares Outstanding: 166.7 million In recent years, Magna International (MGA) automotive earnings per share (EPS) increased by 18%, to 5, $40. Its EPS is expected to grow 8-10% annually over the next five years. Magna is expected to generate revenue growth of approximately 5% per year, driven by new product launches and higher prices. With a Zacks #1 (Strong Buy) rating, Magna is well positioned to outperform the entire automotive industry. It has a diverse customer base with a strong presence in Asia, Europe and North America. In addition, Magna’s product portfolio is well diversified across automotive segments and end markets.
Dana Incorporated (DAN)
Headquarters: Kent, Ohio Market Capacity: $4.4 billion Shares Outstanding: 83.9 million Last year, Dana Inc. (DAN) automotive revenue increased 7% to 11.1 billions of dollars. The company’s automotive earnings per share (EPS) rose 23% to $3.12. Dana is expected to generate revenue growth of approximately 5% and EPS growth of up to 10% annually over the next five years. Dana’s EPS is driven by higher average selling prices and new product launches. While the company generates more than 50% of its revenue in North America, it has a strong presence in Asia and Europe, with a well-diversified product portfolio in automotive segments, including commercial vehicles. Dana’s strong product innovation and strategic acquisitions drove its revenue growth.
QuantumScape (QS)
Headquarters: California, USA Market Capacity: $16.1 billion Shares Outstanding: 83.0 million Last year, QuantumScape (QS) automotive revenue increased 12% to $8.7 billion of dollars. The company’s automotive EPS rose 32% to $1.02. QS expects revenue growth of approximately 12-15% per year and EPS growth of up to 25% per year over the next five years. QuantumScape automotive EPS is driven by higher average selling prices and new product launches. The company has a strong presence in Asia and Europe and a well-diversified product portfolio across all automotive segments, including commercial vehicles.
Dorman Products (DORM)
Headquarters: Ohio, USA Market Cap: $6.8 billion Shares Outstanding: 63.6 million reach $2.6 billion. The company’s automotive EPS rose 24% to $1.04. Dorman is expected to generate revenue growth of approximately 8-10% per year and EPS growth of up to 15% per year over the next five years. Dorman’s automotive EPS is driven by higher pricing, including a higher mix of premium product sales and new product launches. The company has a strong presence in Asia and Europe and a well-diversified product portfolio across all automotive segments, including commercial vehicles. Strong product innovation and Dorman’s strategic acquisitions drove its revenue growth.
Conclusion
Auto stocks were among the worst performing sectors in the stock market in 2018 due to worries about economic growth, rising interest rates and trade wars. As auto demand growth slowed, auto inventories fell further. Still, auto stocks represent a solid investment opportunity in general and auto parts stocks in particular. Auto parts makers have performed well relative to automakers, suggesting they have more pricing power in the market. Auto parts stocks are also less cyclical than automakers and are less exposed to trade wars. Overall, auto stocks appear to be an attractive investment opportunity at the moment, and these auto component stocks are well positioned to benefit in the years to come.
