Auto stocks have long been a staple for long-term portfolios looking to benefit from the automotive industry’s massive global market, surpassing $4 trillion. With interest rates potentially declining in the coming months and supply chain issues stabilizing, automotive stocks continue to attract attention. In addition, despite short-term setbacks, interest in electric vehicles (EVs) and autonomous driving technologies is still riding high.
In fact, according to S&P Global (NYSE:SPGI), global light vehicle sales are expected to increase 2% to 3% from 2024-2025. Much of this gentle growth stems from
With that information, here are three top auto stocks leading in innovation and profitability. These automotive stocks deserve a spot on your must-buy list.
Aptiv (APTV)
With its pivotal role in the industry’s shift towards autonomous driving, Aptiv (NYSE:APTV) stands out as a top pick among the must-buy auto stocks. This Ireland-based automotive technology company manufactures critical components for active safety systems, advanced driver-assistance systems (ADAS), and autonomous vehicle (AV) technologies. We should note that the global AV market is projected to grow from $1.5 trillion in 2022 to $13.6 trillion by 2030, with a compound annual growth rate (CAGR) of over 32%.
In the first quarter of 2024, Aptiv reported revenues of just under $5 billion, marking a 2% year-over-year (YOY) increase. Diluted EPS rose to $1.16 from $0.91, despite challenges in electrification and ongoing labor and material costs. Adjusted operating income margin improved to 11.1% from 9.1%, driven by cost reductions and higher volumes.
Investors have noted Aptiv’s recent strategic wins, including new business bookings totaling nearly $13 billion. The restructuring of its Motional joint venture with Hyundai contributes to the company’s growth potential as well. While the full-year outlook remains conservative, Aptiv’s focus on cost optimization and technological leadership positions it for potential success.
Yet, APTV stock is down nearly 20% year-to-date (YTD). Currently, the shares are trading at 10.4 times forward earnings and 1 times sales. Meanwhile, analysts’ 12-month median price forecast for APTV stands at $98.50, a 35% upside potential.
Blue Bird (BLBD)
The Georgia-based Blue Bird is next on our list of top automotive stocks (NASDAQ:BLBD). As the market leader in electric and low-emission school buses, Blue Bird sells vehicles to private fleet operators and governments.
In May, BLBD announced impressive second quarter 2024 results, with revenue hitting a record $346 million—a 15% YOY increase. Adjusted diluted EPS surged to 89 cents, up from 62 cents a year ago.
Blue Bird has a solid backlog of over 5,900 units, meaning continued revenue streams and market demand. The EPA’s Clean School Bus Program, a key growth driver, awarded almost $1 billion in funding in 2023 and expects at least $1.5 billion for new EV orders in 2024. The company raised its full-year guidance, confirming confidence in its growth trajectory.
Recently, Blue Bird secured an $80 million grant from the U.S. Department of Energy (DOE) to expand its EV manufacturing capabilities. Additionally, it will debut its electric-powered step van at the Advanced Clean Transportation Expo.
Since January, BLBD stock has soared nearly 84%. Shares are trading at 19.9 times forward earnings and 1.3 times trailing sales. Analysts see further growth potential, with a 12-month median price target of $52.00, implying nearly a 5% upside.
Toyota Motor (TM)
Closing today’s list of top automotive stocks is Toyota Motor (NYSE:TM), a titan in the global automotive industry known for reliability, fuel efficiency, and innovation. The company’s fiscal year 2024 earnings, ending March 31, showcased a 21.4% YOY increase in revenue of 45.1 trillion Japanese yen. Diluted EPS came in at 365.90 Japanese yen compared to 179.47 Japanese yen in fiscal year 2023.
Wall Street concurs that Toyota remains a leader in hybrid electric vehicle (HEV) technology, offering fuel efficiency without the range limitations of pure EVs. According to the latest sales, production, and export results, there was a 2% YOY decline in global vehicle sales in May. Yet, total EV sales (including battery-electric, fuel cell, and hybrid) increased 26.3%, highlighting the company’s strength in this area.
To solidify its position in the battery race, Toyota acquired full ownership of Primearth EV Energy (PEVE), a battery joint venture with Panasonic Holdings (OTCMKTS:PCRFF). This acquisition aims to enhance Toyota’s technological capabilities, reduce costs, and meet growing EV demand.
Since January, TM stock has gained over 13%, supported by a 2.3% dividend yield. Currently, the shares are changing hands at 9.3 times forward earnings and 0.9 times sales. Finally, Wall Street’s 12-month median price forecast for TM stock stands at $240.33. Such a move would suggest an upside potential of 15% from the current levels.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
