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With Retail Spending on the Rise, Auto Parts and Supplies Look Hot.

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On Monday, the U.S. Commerce Department released the latest retail sales figures and for the first time in 2018, they were a positive surprise.  Retail sales overall were up 4% over the comparable year-ago period. The majority of the gains came from autos and auto supplies. Sales in non-automotive categories were up a modest 0.2%, but Auto Sales surged a  full 2%.

Consumers are Optimistic

With Consumer Confidence at a decades-long high and the recent tax cuts putting more cash in customers’ pockets, analysts have been expecting higher spending, but until now the effect has been somewhat lackluster.
That’s finally starting to change.

But which companies stand to gain from the resurgent consumer behavior?  The obvious answer is the automakers themselves and global manufacturers like Fiat Chrysler (FCAU - Free Report) and Volkswagen AG (VLKAY - Free Report) are already showing accelerating earnings growth and upwardly revised estimates.

But what if we look a little deeper into the companies that provide the parts and equipment that support new vehicle manufacturing and operation?  Are there any diamonds in the rough in lesser-known names that are experiencing a sales tailwind of late?

Drivelines Driving Profits

Ohio company Dana Incorporated (DAN - Free Report) operates in North and South America, Europe and Asia.  They manufacture driveline technologies for a wide range of consumer and commercial vehicles.  Because they sell to such a diverse swath of customers, their results are less sensitive to temporary regional and seasonal differences.  

Thanks to 4 upward earnings estimate revisions in the past 30 days, Dana Industries carries a Zacks Rank #1 (Strong Buy), with the consensus estimate for 2018 at $2.91/share, up 17% over the $2.52/share they earned in 2017.  

Dana has exceeded the Zacks Consensus Earnings estimate in each of the past 4 quarters.  They report Q1 2018 results on April 30th.

Douglas Dynamics (PLOW - Free Report) manufactures snow and ice control equipment for light and medium duty trucks.  With a product line composed mainly of plows and salt/sand spreaders, their customer base is primarily snow removal operators who provide services to consumers, businesses and municipalities.

Helped in part by a brutal 2017-2018 winter that has seen record snowfall in some areas well into April, Douglas Dynamics is expected to post sales of $504M this year, a healthy increase over the $474M they did in 2017.

The Zacks Consensus Earnings Estimate is up at well, currently $2/share, a 38% increase over 2017’s $1.45/share, and better than the most recent consensus of $1.72/share just 60 days ago.

Douglas Dynamics is a Zacks Rank #1 (Strong Buy).

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