Even though the blend of various economic challenges could keep the economy under pressure for a while, the improved technologies and rising Electric Vehicle (EV) adoption should bolster the long-term growth of the auto sector. Amid this, let us probe into some automotive stock Daimler Truck Holding AG (DTRUY) and REV Group, Inc. (REVG).
Supply chain constraints and semiconductor shortages have had an impact on the auto industry alongside macroeconomic headwinds. However, the sector is well-positioned to thrive despite such downturns.
The auto industry, comprising automakers and their suppliers, contributes 3% of the U.S. GDP. According to estimates provided by industry research firm J.D. Power, total new-vehicle sales for April 2023, including retail and non-retail transactions, are projected to reach 1,316,500 units, a 9.8% increase from April 2022.
Moreover, EVs are poised to register strong sales in 2023. IEA expects sales to increase by 14 million, indicating a growth of 3.5% year-over-year. Consequently, EVs could account for 18% of total car sales across the year. Coupled with national policies and incentives, exceptionally high oil prices will likely lead to a transition to EVs, which could bolster sales.
The global EV market is projected to reach $957.06 billion by 2030, expanding at a CAGR of 24.5%. Furthermore, the automotive industry is projected to reach $6.07 trillion by 2030, growing at a CAGR of 6.9%.
Against this backdrop, fundamentally strong automotive stocks DTRUY and REVG could be solid buys in May.
Daimler Truck Holding AG (DTRUY)
Headquartered Leinfelden-Echterdingen, Germany, DTRUY manufactures and sells light, medium, and heavy-duty trucks and buses in Europe, North America, Asia, Latin America, and internationally. It operates through five segments: Trucks North America; Mercedes-Benz; Trucks Asia; Daimler Buses; and Financial Services.
Recently, Freightliner, a leading manufacturer of medium and heavy-duty trucks and a division of Daimler Truck North America LLC (DTNA), unveiled the series production eM2 for pick-up and delivery applications, which is ready to order and will start production in the fall of this year. This should bode well for the company.
In April, DTRUY announced the launch of a line of electric trucks in the U.S. market under the new brand name RIZON. The RIZON brand and its customer-focused zero-emission trucks should add to the company’s topline.
For the 2022 financial year, DTRUY’s Board of Management and Supervisory Board are expected to propose to the Annual General Meeting on June 21, 2023, a dividend payment of €1.30 per share.
DTRUY’s revenue has grown at 3.3% CAGR over the past three years. Moreover, its EBIT and net income have grown at 8.8% and 15.5% CAGRs over the past three years, respectively.
In terms of forward EV/Sales, DTRUY is trading at 0.71x, 54.6% lower than the industry average of 1.56x. Its forward EV/EBITDA multiple of 6.74 is 35.2% lower than the 10.40 industry average.
DTRUY’s total revenues came in at €14.78 billion ($16.25 billion) for the fiscal fourth quarter that ended December 31, 2022, up 30.3% year-over-year. Its adjusted EBIT increased 72.6% year-over-year to €1.03 billion ($1.13 million). Its free cash flow for the quarter stood at €1.84 billion ($2.02 billion), up 102.4% from the previous-year quarter.
Moreover, DTRUY’s total current assets stood at €32.37 billion ($35.58 billion) as of December 31, 2022, compared to €27.93 billion ($30.70 billion) as of December 31, 2021.
DTRUY’s revenue for the fiscal second quarter ending June 2023 is expected to increase 12.5% year-over-year to $14.04 billion. It topped consensus revenue in each of the four trailing quarters, which is impressive.
The stock has gained 9.9% over the past year and 15.2% over the past six months to close the last trading session at $15.83.
It’s no surprise that DTRUY has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B for Value, Stability, and Quality. DTRUY is ranked #9 of 57 stocks in the Auto & Vehicle Manufacturers industry.
To see additional ratings for DTRUY’s Momentum and Sentiment, click here.
REV Group, Inc. (REVG)
REVG is involved in the design, manufacture, and distribution of specialty vehicles and related aftermarket parts and services. The company’s customized vehicle solutions cater to diverse applications, such as essential needs for public services, commercial infrastructure, and consumer leisure.
In March, lDorado National (California) or ENC, a subsidiary of REVG, and an industry leader in heavy-duty transit buses and emission-free technology, secured an order for three Axess EVO-FC zero-emissions hydrogen fuel cell buses from Rochester-Genesee Regional Transportation Authority.
The company’s board of directors declared a quarterly dividend in the amount of $0.05 per share of common stock, paid to shareholders on April 14, 2023. Its annualized dividend rate of $0.20 per share yields 1.86% on prevailing prices. REVG’s four-year average dividend yield is 1.53%.
REVG’s revenue has grown at 0.33% CAGR over the past three years. Moreover, its EBIT has grown at 7.9% CAGR over the past three years.
In terms of forward EV/Sales, REVG is trading at 0.37x, 76.4% lower than the industry average of 1.57x. Its forward EV/EBITDA multiple of 7.38 is 29% lower than the 10.40 industry average.
During the fiscal first quarter that ended January 31, 2023, REVG’s net sales increased 8.7% year-over-year to $583.50 million. During the same quarter, the company’s adjusted EBITDA and adjusted net income came in at $21.30 million and $6.90 million, respectively. Also, its adjusted net income per common share came in at $0.12.
REVG’s total current assets stood at $941.30 million as of January 31, 2023, compared to $888.40 million as of October 31, 2022.
REVG’s revenue and EPS for the fiscal third quarter ending July 2023 are expected to increase 2.4% and 9% year-over-year to $601.11 million and $0.26, respectively. It topped consensus revenue and EPS in three of the four trailing quarters.
Over the past five days, the stock has lost 1.5% to close the last trading session at $10.37.
REVG’s POWR Ratings reflect a positive outlook. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a grade B for Growth, Value, Stability, and Sentiment. REVG is ranked #10 within the same industry.
Click here to see additional ratings for REVG’s Momentum and Quality.
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DTRUY shares were trading at $16.00 per share on Friday morning, up $0.17 (+1.07%). Year-to-date, DTRUY has gained 3.96%, versus a 7.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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