The electric vehicle market has a promising future, driven by government incentives, technological advancements, and growing consumer awareness of climate change. Improvements in battery technology, charging infrastructure, and vehicle range have made EVs more practical and convenient for daily use.
Amid this backdrop, investors could consider buying fundamentally strong electric vehicle stocks such as General Motors Company (GM), Isuzu Motors Limited (ISUZY), and Honda Motor Co., Ltd. (HMC) to boost their portfolios. Before exploring the fundamentals of these stocks, let's first understand what's shaping the electric vehicle industry's prospects.
In the first quarter of 2024, over 3.20 million new passenger plug-in electric cars were registered globally, representing more than a 25% year-over-year rise. Notably, government incentives and regulations, such as tax breaks, subsidies, and stricter emissions standards, are driving the global EV market. Rising consumer awareness of climate change further boosts the shift to electric vehicles.
With the EV competition intensifying, U.S. new vehicle sales hit 1.44 million units in May 2024, up 5% year-over-year. Moreover, BloombergNEF's EV outlook anticipates 730 million passenger EVs on the road by 2040, with sales touching $27 million by 2026. The increasing availability of fast-charging stations has made it easier for consumers to switch to EVs, boosting sales.
Given the accelerated adoption of EVs, the global EV market is anticipated to hit $8.85 trillion by 2030, growing at a CAGR of 33.6%.
Considering these conducive trends, let's examine the fundamentals of the three Auto & Vehicle Manufacturers stock picks, beginning with the third choice.
Stock #3: General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and provide software-enabled services and subscriptions worldwide. The company operates through GM North America, GM International, Cruise, and GM Financial segments.
On May 20, 2024, GM's GM Defense and Mistral Inc., announced the integration of the innovative UVision and Mistral's Hero-120 loitering munition with GM Defense's light tactical utility vehicle. Combining GM Defense's expertise in military mobility with Mistral and UVision's loitering munition technology enabled them to support the tactical needs of a modernized force.
GM's trailing-12-month CAPEX/Sales of 6.47% is 113.8% higher than the industry average of 3.03%. Its trailing-12-month Return on Common Equity of 15.57% is 35.5% higher than the industry average of 11.49%. Similarly, its trailing-12-month net income margin of 6.13% is 28.2% higher than the industry average of 4.78%.
GM's revenue for the fiscal first quarter that ended March 31, 2024, amounted to $43.01 billion, up 7.6% year-over-year. Its adjusted EBIT grew 1.8% from the year-ago quarter to $3.87 billion. The company's net income attributable to stockholders and adjusted EPS stood at $2.98 billion and $2.62, up 24.4% and 18.6% over the prior-year quarter, respectively.
For the quarter ending June 30, 2024, GM's revenue and EPS are expected to increase 1% and 38.7% year-over-year to $45.20 billion and $2.65, respectively. It surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 41.6% over the past nine months to close the last trading session at $47.65.
GM's POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
GM has a B grade for Growth and Value. It is ranked #15 out of 52 stocks in the Auto & Vehicle Manufacturers industry. Click here to see GM's Momentum, Stability, Sentiment, and Quality ratings.
Stock #2: Isuzu Motors Limited (ISUZY)
Headquartered in Yokohama-shi, Japan, ISUZY manufactures and sells commercial vehicles, light commercial vehicles, and diesel engines and components worldwide. Its products include heavy and medium-duty trucks and buses, and light-duty trucks, passenger pickup vehicles, pickup trucks, and SUVs, and marine and industrial engines.
On May 28, 2024, ISUZY launched the first of a series of battery electric vehicle (BEV) flat-floor route buses, ERGA EV (short wheelbase urban model), in Japan. In addition to incorporating zero-emission BEV technology, ERGA EV is the first bus in Japan with a fully flat-floor design.
The ERGA EV will be at the forefront of introducing next-generation buses in Japan, driving the momentum towards carbon neutrality in public transportation.
On May 14, 2024, ISUZY and Gatik AI, Inc. agreed to enhance the development of the North American autonomous driving business. ISUZY invested $30 million in Gatik, forging a strong partnership between the two companies in the pursuit of realizing mobility services based on level 4 autonomous driving.
ISUZY's trailing-12-month asset turnover ratio of 1.07x is 8% higher than the industry average of 0.99x. Likewise, its trailing-12-month Return on Total Capital and Return on Total Assets of 8.64% and 5.41% are 37.7% and 29.3% higher than the industry averages of 6.28% and 4.18%, respectively.
For the fiscal year that ended March 31, 2024, ISUZY's net sales and operating profit stood at ¥3.39 trillion ($21.57 billion) and ¥293.09 billion ($1.87 billion), up 6% and 15.6% year-over-year, respectively. For the same year, its profit attributable to owners of the parent and net income per share increased 16.3% and 17.5% over the previous year to ¥176.44 billion ($1.12 billion) and ¥229.92, respectively.
Street expects ISUZY's fiscal 2025 revenue to increase 161.7% year-over-year to $22.04 billion. The company surpassed consensus revenue estimates in three of the trailing four quarters. ISUZY has gained 4.9% year-to-date, closing the last trading session at $12.96.
ISUZY's strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
It has an A grade for Value and a B for Stability and Quality. It is ranked #7 in the same industry. Get ISUZY's Growth, Momentum, and Sentiment ratings here.
Stock #1: Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power, and other products internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Power Product and Other Businesses.
On June 13, 2024, HMC collaborated with Emporia Corp. to drive innovation in the home energy management sector. The partnership included HMC investing in Emporia and signing a joint development agreement in North America focused on smart EV charging and home energy management solutions for consumers.
On the same date, HMC and Mitsubishi Corporation announced plans to establish a new 50/50 joint venture (JV) company, ALTNA Co., Ltd., in July 2024. The new JV is based on the memorandum of understanding the two companies signed in October 2023 to begin discussions toward the creation of new businesses in light of anticipated growth in the EV market toward a decarbonized future society.
HMC's trailing-12-month net income margin and levered FCF margin of 5.42% and 7.29% are 13.4% and 30.5% higher than the industry averages of 4.78% and 5.59%, respectively.
HMC's sales revenue for the fiscal year that ended March 31, 2024, increased 20.8% from the year-ago value to ¥20.43 trillion ($130.08 billion). Its operating profit rose 77% year-over-year to ¥1.38 trillion ($8.80 billion).
Moreover, its profit for the year attributable to owners of the parent stood at ¥1.11 trillion ($7.05 billion), up 70% over the previous-year value. Also, its earnings per share attributable to owners of the parent grew 76.5% year-over-year to ¥225.88.
Analysts expect HMC's revenue for the quarter ending September 30, 2024, to increase 2% year-over-year to $33.58 billion. Its EPS for fiscal 2026 is expected to grow 157.4% year-over-year to $2.61. Over the past six months, the stock has gained 4.4%, closing the last trading session at $31.96.
HMC's POWR Ratings reflect its robust prospects. It has an overall A rating, equating to a Strong Buy in our proprietary rating system.
HMC has an A grade for Stability and a B for Value and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #4. Click here for the additional POWR Ratings of HMC (Growth, Momentum, and Sentiment).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
GM shares were trading at $46.43 per share on Friday afternoon, down $1.22 (-2.56%). Year-to-date, GM has gained 29.98%, versus a 14.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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