The auto sector has been engulfed by a lot of pressing challenges, such as cost inflation, supply-chain disruptions, labor constraints, etc., in 2023. Despite these headwinds, some auto players have managed to soar high with their continued innovation and restructuring strategies.
The space is also battling increasing research and development costs and high capex requirements to evolve according to the changing dynamics of the industry. The effects of these headwinds have been mitigated by efforts toward an enhanced product portfolio, strategic collaborations, footprint expansion and restructuring measures.
These above-mentioned initiatives, combined with strong pent-up demand for personal mobility and government initiatives such as clean vehicle tax credit, have buoyed the performance of a few industry participants. Cost optimization through headcount reduction and rolling out innovative products and strategies have helped several companies stay relevant during these challenging times.
We have pointed out three auto stocks that have rallied more than 25% this year. These stocks are well-positioned to continue with their solid momentum with their robust innovation technology and cost optimization efforts amid the current inflationary scenario.
The outlook for the auto industry in 2024 appears brighter amid potentially lower interest rates next year, which will reduce the affordability concern. The S&P Global Mobility expects auto sales to rise 15.9 million units next year, representing an uptick from a projected 15.5 million units in 2023.
3 Solid Performers in 2023 With More Upside Potential
The Goodyear Tire & Rubber Company GT is one of the largest tire manufacturing companies in the world. Its Goodyear Forward Transformation Plan, designed to optimize the company’s portfolio, enhance margins and reduce leverage, aims to unlock significant value for shareholders.
Goodyear’s strategic restructuring in the EMEA segment is likely to reap benefits. The Zacks Consensus Estimate for Goodyear’s 2024 earnings per share has increased from $1.30 to $1.43 over the past 60 days. This Zacks Rank #2 (Buy) company’s shares have jumped 44.7% year to date.
Autoliv, Inc. ALV is a holding company that operates through two principal subsidiaries — Autoliv AB and Autoliv ASP. It is at the forefront of automotive safety technology. The soaring popularity of electric vehicles is extending Autoliv’s exposure to this red-hot market, thereby opening new growth avenues for the firm.
Autoliv is undertaking extensive customer discussions to secure price increases to compensate for cost inflation. This Zacks Rank #3 (Hold) company’s shares have jumped 41.7% year to date. The company has a long-term EPS growth rate of 30.9%.
Allison Transmission Holdings, Inc. ALSN is a manufacturer of fully automatic transmissions for medium and heavy-duty commercial and heavy-tactical U.S. defense vehicles. The buyout of the Off-Highway transmission portfolio of AVTEC positions Allison for growth opportunities in the India Off-Highway market and will aid in further expansion in the Asia Middle East markets.
Allison’s focus on advanced technology and continued innovation in product development augurs well. This Zacks Rank #3 company is well-positioned to benefit from rising global defense budgets. ALSN shares have risen 40.1% this year, and it has a long-term EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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Autoliv, Inc. (ALV) : Free Stock Analysis Report
The Goodyear Tire & Rubber Company (GT) : Free Stock Analysis Report
Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report