Auto part suppliers will have a constant niche in the broader automotive space and several auto equipment stocks are very attractive.
While aftermarket parts suppliers such as Advanced Auto Parts AAP have notably struggled this year, many original equipment manufacturers are a bright spot for the auto sector.
Technological innovation in the auto sector makes many equipment manufacturers direct beneficiaries more so than auto part retailers like Advanced Auto Parts. With now looking like an ideal time to invest, here are three highly-ranked auto equipment stocks to consider.
Allison Transmission Holdings ALSN: As the largest manufacturer of fully automatic transmissions, Allison Transmission Holdings stock is very attractive in terms of valuation.
This along with steady growth makes Alison Transmission’s stock worthy of investors’ consideration. Impressively, fiscal 2023 earnings are anticipated to climb 24% to $6.93 per share compared to $5.53 a share last year. Plus, FY24 earnings are forecasted to rise another 3%.
More intriguing is that Allison Transmission’s stock has soared 42% this year but still trades at just 8.4X forward earnings. The impressive price performance could continue with Allison Transmission’s stock trading at an attractive discount to the Zacks Automotive-Original Equipment Industry average of 22.9X forward earnings and the S&P 500’s 20.6X.
Earnings estimate revisions are nicely up over the last 30 days offering further support. Notably, Allison Transmission’s stock has topped the Nasdaq and the broader Zacks Auto Tires & Trucks sector’s +30% YTD performances along with the S&P 500’s +16%.
Commercial Vehicle Group CVGI: Rising earnings estimates are helping to reconfirm Commercial Vehicle Group’s attractive valuation and growth trajectory.
Supplying interior systems and vision safety solutions to a variety of commercial vehicle markets, the company’s FY23 earnings estimates have risen 8% in the last month with FY24 EPS estimates up 5%. Commercial Vehicle Group’s stock has soared +30% YTD but the rising earnings estimates support the case that CVGI shares are cheap at $8 and 8.4X forward earnings.
Still trading at a steep discount to the benchmark and the Automotive-Original Equipment Industry’s forward earnings multiple makes Commercial Vehicle Group’s EPS growth more compelling. Fiscal 2023 earnings are now forecasted at $1.03 per share, skyrocketing from $0.51 a share in 2022. Plus, FY24 earnings are expected to rise another 12%.
Gentex GNTX: Lastly, Gentex stock is intriguing right now as a supplier of automatic-dimming rear-view mirrors and electronics to the automotive industry.
Gentex stock is up a respectable +18% this year with earnings estimates trending higher over the last quarter and slightly up in the last month as well. Gentex trades at 18.1X forward earnings which is nicely beneath the Automotive-Origional Equipment Industry average and the S&P 500’s 20.6X.
While the P/E discount may not be as compelling as the others on the list it’s notable that Gentex stock trades 26% below its decade-long high of 25.1X and closer to the median of 16.3X. Furthermore, Gentex’s earnings are now projected to climb 29% in FY23 and leap another 23% in FY24 to $2.18 per share.
Bottom Line
These auto equipment stocks all land a Zacks Rank #1 (Strong Buy) mostly attributed to the trend of rising earnings estimate revisions.
Furthermore, Allison Transmissions, Commercial Vehicle Group, and Gentex stock offer sound value to investors at their current levels and are shaping up to be viable investments for 2023 and beyond.
Allison Transmission Holdings, Inc. (ALSN): Free Stock Analysis Report
Commercial Vehicle Group, Inc. (CVGI): Free Stock Analysis Report
Gentex Corporation (GNTX): Free Stock Analysis Report
Advance Auto Parts, Inc. (AAP): Free Stock Analysis Report
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