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Auto Roundup: LAD's Buyout Binge Continues, AZO's Buyback Gets a Boost & More
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U.S. legacy automaker General Motors (GM - Free Report) is set to invest $632 million in Fort Wayne Assembly, bolstering the production of next-generation internal combustion engine (ICE) full-size light-duty trucks. This significant investment reaffirms GM's commitment to its leading position in the full-size truck market and underscores its dedication to providing customers with a robust lineup of ICE vehicles in the future, strengthening its U.S. manufacturing operations.
One of the leading auto retailers, Lithia Motors, Inc. (LAD - Free Report) , is on an acquisition spree, buying 13 dealerships from Priority Automotive to strengthen its foothold in the Mid-Atlantic region. Italian-American auto giant Stellantis (STLA - Free Report) issued a massive recall that affected more than 434,000 vehicles, addressing rear coil spring defects and engine stall risks.
Automotive equipment provider BorgWarner, Inc. (BWA - Free Report) has been gearing up to unlock new investment opportunities with the imminent spin-off of PHINIA, its Fuel Systems and Aftermarket segments. Lastly, auto retail parts company AutoZone, Inc. (AZO - Free Report) boosted its buyback authorization by $2 billion in the wake of strong financial performance and its commitment to delivering value to shareholders.
Lithia purchased 13 car dealerships from the Priority Automotive Group in Virginia to expand its footprint in the booming Mid-Atlantic region. The deal will add three Honda, two Chevrolet, two Toyota, one Ford and one Hyundai stores, as well as a few small stores, to the American automotive retailer’s portfolio. These dealerships are projected to generate over $1.2 billion in annualized revenues. The acquisition of stores was funded using Lithia’s on-balance sheet capacity.
Bryan DeBoer, president and CEO, Lithia, said that these stores would not only help the company cultivate long-term relationships with their customers in the region but will also allow them to reap the benefits of Priority Automotive’s strong track record of customer retention and commitment to community involvement. With this buyout, Lithia has acquired more than $3.2 billion in annualized revenues this year, setting the stage for another solid year of acquisition growth. Last year, the company generated more than $3.5 billion in annualized revenues.
General Motors announced plans to invest $632 million in Fort Wayne Assembly to develop the plant for producing next-generation ICE full-size light-duty trucks. The Fort Wayne Assembly has manufactured the Chevrolet Silverado 1500 and GMC Sierra 1500. Both trucks emerged as the best-selling retail full-size light-duty pickups in 2022. This investment will strengthen General Motors’ industry-leading full-size truck business. It will enhance GM’s U.S. manufacturing operations, which include over 50 assembly, stamping, propulsion and component plants and parts distribution centers nationwide. It also underscores the automaker’s commitment to providing a strong portfolio of ICE vehicles to its customers in the future.
With this announcement, GM’s U.S. manufacturing and parts distribution facility has committed more than $31.6 billion in investment since 2013. General Motors has announced over $2 billion of investment in Fort Wayne Assembly and Operations and $2.8 billion in Indiana manufacturing operations since 2013.
Stellantis is recalling more than 354,000 Jeep Grand Cherokee worldwide. The recall will address the defect in the rear coil spring that can fall off while the vehicle is moving. The models called back include the 2022-2023 Grand Cherokee and the 2021-2023 Grand Cherokee L SUVs.There has been no report of a crash or injuries due to the defect as of May 25, 2023. Among the recalled vehicles, most are in North America. The vehicle owners will be notified by letter starting Jul 28, 2023. Dealers will perform an inspection on the spring and replace assemblies if required.
Moreover, the automaker is also recalling 80,629 trucks and SUVs due to the risk of engine stalls. Per the NHTSA notice, the models covered in the recall include the 2014-2019 Ram 1500 and the 2014-2020 Jeep Grand Cherokee with 3.0L diesel engines. The notice states that the crankshaft position sensor tone wheel may delaminate, because of which the engine may lose its ability to synchronize the fuel injector pulses and camshaft timing, potentially causing an engine stall. Dealers will update the powertrain control module software to maintain vehicle propulsion and the update will be free of charge, said the regulator.
BorgWarner is poised to complete the spin-off of its Fuel Systems and Aftermarket segments, which will now operate as an independent entity named PHINIA. The anticipated completion date is set for Jul 3 as disclosed in PHINIA's final information statement filing with the Securities and Exchange Commission. Following the spin-off, PHINIA common stock will be listed on the New York Stock Exchange under the ticker symbol PHIN, with trading expected to commence on Jul 5, 2023.
BorgWarner's decision to spin off PHINIA aligns with its Charging Forward strategy, aimed at establishing a strong foothold as a technology leader in eProducts and maximizing the value of its foundational portfolio.BorgWarner's Charging Forward strategy focuses on technological advancements, paving the way for innovative eProducts. Meanwhile, PHINIA will emerge as an independent entity specializing in Fuel Systems and Aftermarket segments, presenting investors with a distinct investment avenue.
AutoZone revealed its plans for a significant share buyback program. The company disclosed an additional authorization of $2 billion shares as part of its ongoing share repurchase initiative. Since its inception in 1998, the board of directors at AutoZone has authorized an impressive $35.7 billion in share repurchases. This demonstrates the company's dedication to enhancing shareholder returns and maintaining a solid investment-grade credit rating.
Jamere Jackson, the CFO and executive vice president of Finance and Store Development at AutoZone, expressed confidence in the company's financial performance and its ability to generate strong cash flows. During the last reported quarter, AutoZone repurchased shares worth $908.2 million, leaving approximately $843.6 million under the authorization for future buybacks at the end of the quarter. The company's robust operating cash flow of $724.7 million during fiscal third-quarter 2023 highlights its solid financial position. This provides AutoZone with the flexibility to invest in growth initiatives while returning significant value to shareholders through share repurchases.
Price Performance
The following table shows the price movement of some of the major auto players over the last week and six-month period.
Image Source: Zacks Investment Research
What’s Next in the Auto Space?
Stay tuned for the quarterly reports of used car retailer CarMax and RV maker Winnebago Industries, scheduled to release on Jun 21 and Jun 23, respectively. Industry watchers will keep a tab on May 2023 passenger vehicle registrations to be released by the European Automobile Manufacturers Association soon.
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Auto Roundup: LAD's Buyout Binge Continues, AZO's Buyback Gets a Boost & More
U.S. legacy automaker General Motors (GM - Free Report) is set to invest $632 million in Fort Wayne Assembly, bolstering the production of next-generation internal combustion engine (ICE) full-size light-duty trucks. This significant investment reaffirms GM's commitment to its leading position in the full-size truck market and underscores its dedication to providing customers with a robust lineup of ICE vehicles in the future, strengthening its U.S. manufacturing operations.
One of the leading auto retailers, Lithia Motors, Inc. (LAD - Free Report) , is on an acquisition spree, buying 13 dealerships from Priority Automotive to strengthen its foothold in the Mid-Atlantic region. Italian-American auto giant Stellantis (STLA - Free Report) issued a massive recall that affected more than 434,000 vehicles, addressing rear coil spring defects and engine stall risks.
Automotive equipment provider BorgWarner, Inc. (BWA - Free Report) has been gearing up to unlock new investment opportunities with the imminent spin-off of PHINIA, its Fuel Systems and Aftermarket segments. Lastly, auto retail parts company AutoZone, Inc. (AZO - Free Report) boosted its buyback authorization by $2 billion in the wake of strong financial performance and its commitment to delivering value to shareholders.
While STLA currently holds a Zacks Rank #2 (Buy), GM, AZO, LAD and BWA carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Last Week’s Top Stories
Lithia purchased 13 car dealerships from the Priority Automotive Group in Virginia to expand its footprint in the booming Mid-Atlantic region. The deal will add three Honda, two Chevrolet, two Toyota, one Ford and one Hyundai stores, as well as a few small stores, to the American automotive retailer’s portfolio. These dealerships are projected to generate over $1.2 billion in annualized revenues. The acquisition of stores was funded using Lithia’s on-balance sheet capacity.
Bryan DeBoer, president and CEO, Lithia, said that these stores would not only help the company cultivate long-term relationships with their customers in the region but will also allow them to reap the benefits of Priority Automotive’s strong track record of customer retention and commitment to community involvement. With this buyout, Lithia has acquired more than $3.2 billion in annualized revenues this year, setting the stage for another solid year of acquisition growth. Last year, the company generated more than $3.5 billion in annualized revenues.
General Motors announced plans to invest $632 million in Fort Wayne Assembly to develop the plant for producing next-generation ICE full-size light-duty trucks. The Fort Wayne Assembly has manufactured the Chevrolet Silverado 1500 and GMC Sierra 1500. Both trucks emerged as the best-selling retail full-size light-duty pickups in 2022. This investment will strengthen General Motors’ industry-leading full-size truck business. It will enhance GM’s U.S. manufacturing operations, which include over 50 assembly, stamping, propulsion and component plants and parts distribution centers nationwide. It also underscores the automaker’s commitment to providing a strong portfolio of ICE vehicles to its customers in the future.
With this announcement, GM’s U.S. manufacturing and parts distribution facility has committed more than $31.6 billion in investment since 2013. General Motors has announced over $2 billion of investment in Fort Wayne Assembly and Operations and $2.8 billion in Indiana manufacturing operations since 2013.
Stellantis is recalling more than 354,000 Jeep Grand Cherokee worldwide. The recall will address the defect in the rear coil spring that can fall off while the vehicle is moving. The models called back include the 2022-2023 Grand Cherokee and the 2021-2023 Grand Cherokee L SUVs.There has been no report of a crash or injuries due to the defect as of May 25, 2023. Among the recalled vehicles, most are in North America. The vehicle owners will be notified by letter starting Jul 28, 2023. Dealers will perform an inspection on the spring and replace assemblies if required.
Moreover, the automaker is also recalling 80,629 trucks and SUVs due to the risk of engine stalls. Per the NHTSA notice, the models covered in the recall include the 2014-2019 Ram 1500 and the 2014-2020 Jeep Grand Cherokee with 3.0L diesel engines. The notice states that the crankshaft position sensor tone wheel may delaminate, because of which the engine may lose its ability to synchronize the fuel injector pulses and camshaft timing, potentially causing an engine stall. Dealers will update the powertrain control module software to maintain vehicle propulsion and the update will be free of charge, said the regulator.
BorgWarner is poised to complete the spin-off of its Fuel Systems and Aftermarket segments, which will now operate as an independent entity named PHINIA. The anticipated completion date is set for Jul 3 as disclosed in PHINIA's final information statement filing with the Securities and Exchange Commission. Following the spin-off, PHINIA common stock will be listed on the New York Stock Exchange under the ticker symbol PHIN, with trading expected to commence on Jul 5, 2023.
BorgWarner's decision to spin off PHINIA aligns with its Charging Forward strategy, aimed at establishing a strong foothold as a technology leader in eProducts and maximizing the value of its foundational portfolio.BorgWarner's Charging Forward strategy focuses on technological advancements, paving the way for innovative eProducts. Meanwhile, PHINIA will emerge as an independent entity specializing in Fuel Systems and Aftermarket segments, presenting investors with a distinct investment avenue.
AutoZone revealed its plans for a significant share buyback program. The company disclosed an additional authorization of $2 billion shares as part of its ongoing share repurchase initiative. Since its inception in 1998, the board of directors at AutoZone has authorized an impressive $35.7 billion in share repurchases. This demonstrates the company's dedication to enhancing shareholder returns and maintaining a solid investment-grade credit rating.
Jamere Jackson, the CFO and executive vice president of Finance and Store Development at AutoZone, expressed confidence in the company's financial performance and its ability to generate strong cash flows. During the last reported quarter, AutoZone repurchased shares worth $908.2 million, leaving approximately $843.6 million under the authorization for future buybacks at the end of the quarter. The company's robust operating cash flow of $724.7 million during fiscal third-quarter 2023 highlights its solid financial position. This provides AutoZone with the flexibility to invest in growth initiatives while returning significant value to shareholders through share repurchases.
Price Performance
The following table shows the price movement of some of the major auto players over the last week and six-month period.
Image Source: Zacks Investment Research
What’s Next in the Auto Space?
Stay tuned for the quarterly reports of used car retailer CarMax and RV maker Winnebago Industries, scheduled to release on Jun 21 and Jun 23, respectively. Industry watchers will keep a tab on May 2023 passenger vehicle registrations to be released by the European Automobile Manufacturers Association soon.