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4 Large-Cap Auto Stocks for a Steady Investment Ride in 2024
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Large caps are found in nearly every portfolio, as their stable nature and successful track records are impossible to ignore. For those seeking large-cap exposure in the auto industry, stocks like Toyota (TM - Free Report) , Ferrari (RACE - Free Report) , O’Reilly Automotive (ORLY - Free Report) and PACCAR (PCAR - Free Report) could be great considerations, all boasting improved earnings outlooks.The industry's resilience, coupled with the stability offered by large-cap stocks (with market capital > $10 billion), positions investors for a smooth ride in the coming year.
2023 U.S. Auto Sales & 2024 Forecasts
In 2023, the U.S. auto industry experienced a significant rebound, with light-vehicle sales estimated to reach 15.4-15.5 million units, a notable increase from 13.87 million units in 2022. This growth can be primarily attributed to improved inventories and rising consumer and fleet demand. Although the sales pace has been cooling from its 2023 peak in June, the overall performance showcased resilience and recovery. The outlook for 2024 remains cautiously optimistic, with Cox Automotive projecting a modest increase in sales volumes to about 15.6 million units.
While the Fed projected three rate cuts totaling 75 basis points for 2024, fostering optimism for potential economic stimulation, the cost of vehicle financing still remains reasonably high. Additionally, with elevated vehicle prices and pent-up demand largely absorbed in 2023, there is a possibility that the sales growth rate might decelerate this year. Quoting Charlie Chesbrough, senior economist at Cox Automotive, “High vehicle prices and high interest rates remain the industry's Grinch right now, and that trend will continue into 2024.”
Volatility to Persist This Year As Well
For the broader markets, uncertainty was the byword last year, given surging inflation and the Fed’s efforts to tame the same. However, 2023 ended pretty well for investors. The S&P 500 is poised to hold up well this year as well. Nonetheless, volatility will persist, just that the source of volatility may shift from monetary policy to geopolitical and presidential factors. Conflicts in Europe and the Middle East, ongoing tensions in China's relationships and threats to global shipping are among the contributing factors. With the eagerly awaited U.S. Presidential election in November, this year is projected to be marked by increased volatility, a common characteristic of election years.
Large-Cap Stocks as a Haven
This expected volatility in the market underscores the appeal of large-cap stocks. These stocks are favored for their well-established nature, greater analyst coverage, robust financials and commitment to boost shareholder returns. The intrinsic stability of large caps acts as a cushion, providing a reliable investment avenue for more conservative investors.
While the allure of large caps lies in their steadiness, it's essential to recognize that this may not align with every investor's risk appetite. Yet, the reduced volatility and consistent performance make large-cap stocks a valuable component of a well-rounded portfolio, especially in the face of anticipated market dynamics in 2024.
4 Stocks to Buy
Toyota: With a market capitalization of more than $245 billion, Japan-based Toyota is the leading automaker in the world in terms of sales and production. To capitalize on the accelerated global shift to environment-friendly vehicles, the auto giant is deepening its focus on manufacturing electric and fuel-cell vehicles, which will bolster its product competitiveness. The Japanese auto giant aims to generate 40% of its global sales from EVs by 2025 and 70% by 2030. Over the past five years, Toyota has increased its dividend five times, with an annualized growth rate of 1.84%.
The Zacks Consensus Estimate for TM’s fiscal 2024 sales and EPS implies year-over-year growth of 11% and 45%, respectively. The earnings estimate for fiscal 2024 and 2025 has been revised upward by $1.98 and 5 cents, respectively, in the past 60 days. Over the trailing four quarters, Toyota surpassed earnings estimates on all occasions, the average surprise being 47%. The stock currently carries a Zacks Rank #2 (Buy) and has a VGM Score of A.
Ferrari: Headquartered in Italy, this luxury supercar manufacturer is riding on its pricing power, burgeoning order book, brand recognition and exclusivity, which enable it to register high margins.The introduction of Ferrari's first-ever utility vehicle, the Purosangue, received acclaim for its performance capabilities. The company—valued at around $61 billion— is poised to embrace the electrification landscape. It targets 80% of sales to comprise full-electric and hybrid models by 2030. The company aims to launch 15 new models from 2023 to 2026.
The Zacks Consensus Estimate for RACE’s 2023 sales and EPS implies year-over-year growth of 18.4% and 31.5%, respectively. Sales and EPS estimates for 2024 imply a further uptick of 10.7% and 12.8%, respectively, on a year-over-year basis. Over the trailing four quarters, Ferrari surpassed earnings estimates on all occasions, the average beat being 12%. The stock currently has a Zacks Rank #2 and a Growth Score of B.
O’Reilly: It is a leading specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The company — with a market cap of more than $55 billion — has been generating record revenues for 30 consecutive years on the back of growth in the auto parts market and expansion of the store base. The ramp-up of e-commerce initiatives and the opening of stores and distribution centers in profitable regions are driving the company’s prospects. Strong cash flow generation is supporting the firm’s robust buyback program, thereby boosting investors’ confidence.
The Zacks Consensus Estimate for ORLY’s 2024 sales and EPS implies year-over-year growth of 6% and 11%, respectively. The earnings estimate for fiscal 2023 and 2024 has been revised upward by 1 cent and 16 cents, respectively, in the past 30 days. Over the trailing four quarters, O’Reilly surpassed earnings estimates on all occasions, the average surprise being 4.3%. The stock currently carries a Zacks Rank #2 and has a VGM Score of A.
PACCAR: Headquartered in Washington, PACCAR is one of the leading names in the trucking business, with reputed brands like Kenworth, Peterbilt and DAF. Accelerated efforts toward electrification, connected vehicle services and advanced driver-assistance system options are set to bolster the company’s prospects. PACCAR’s strong balance sheet is complemented by A+/A1 credit ratings assigned by Standard & Poor's and Moody's, respectively.Over the past five years, PACCAR — with a market cap of more than $50 billion — increased its dividend nine times, with an annualized growth rate of 4.98%.
The Zacks Consensus Estimate for PCAR’s 2023 sales and EPS implies year-over-year growth of 20.5% and 56%, respectively. The earnings estimate for fiscal 2023 and 2024 has been revised upward by 6 cents and 15 cents, respectively, in the past 60 days. Over the trailing four quarters, PACCAR surpassed earnings estimates on all occasions, the average surprise being 16%. The stock currently carries a Zacks Rank #2 and has a VGM Score of A.
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4 Large-Cap Auto Stocks for a Steady Investment Ride in 2024
Large caps are found in nearly every portfolio, as their stable nature and successful track records are impossible to ignore. For those seeking large-cap exposure in the auto industry, stocks like Toyota (TM - Free Report) , Ferrari (RACE - Free Report) , O’Reilly Automotive (ORLY - Free Report) and PACCAR (PCAR - Free Report) could be great considerations, all boasting improved earnings outlooks.The industry's resilience, coupled with the stability offered by large-cap stocks (with market capital > $10 billion), positions investors for a smooth ride in the coming year.
2023 U.S. Auto Sales & 2024 Forecasts
In 2023, the U.S. auto industry experienced a significant rebound, with light-vehicle sales estimated to reach 15.4-15.5 million units, a notable increase from 13.87 million units in 2022. This growth can be primarily attributed to improved inventories and rising consumer and fleet demand. Although the sales pace has been cooling from its 2023 peak in June, the overall performance showcased resilience and recovery. The outlook for 2024 remains cautiously optimistic, with Cox Automotive projecting a modest increase in sales volumes to about 15.6 million units.
While the Fed projected three rate cuts totaling 75 basis points for 2024, fostering optimism for potential economic stimulation, the cost of vehicle financing still remains reasonably high. Additionally, with elevated vehicle prices and pent-up demand largely absorbed in 2023, there is a possibility that the sales growth rate might decelerate this year. Quoting Charlie Chesbrough, senior economist at Cox Automotive, “High vehicle prices and high interest rates remain the industry's Grinch right now, and that trend will continue into 2024.”
Volatility to Persist This Year As Well
For the broader markets, uncertainty was the byword last year, given surging inflation and the Fed’s efforts to tame the same. However, 2023 ended pretty well for investors. The S&P 500 is poised to hold up well this year as well. Nonetheless, volatility will persist, just that the source of volatility may shift from monetary policy to geopolitical and presidential factors. Conflicts in Europe and the Middle East, ongoing tensions in China's relationships and threats to global shipping are among the contributing factors. With the eagerly awaited U.S. Presidential election in November, this year is projected to be marked by increased volatility, a common characteristic of election years.
Large-Cap Stocks as a Haven
This expected volatility in the market underscores the appeal of large-cap stocks. These stocks are favored for their well-established nature, greater analyst coverage, robust financials and commitment to boost shareholder returns. The intrinsic stability of large caps acts as a cushion, providing a reliable investment avenue for more conservative investors.
While the allure of large caps lies in their steadiness, it's essential to recognize that this may not align with every investor's risk appetite. Yet, the reduced volatility and consistent performance make large-cap stocks a valuable component of a well-rounded portfolio, especially in the face of anticipated market dynamics in 2024.
4 Stocks to Buy
Toyota: With a market capitalization of more than $245 billion, Japan-based Toyota is the leading automaker in the world in terms of sales and production. To capitalize on the accelerated global shift to environment-friendly vehicles, the auto giant is deepening its focus on manufacturing electric and fuel-cell vehicles, which will bolster its product competitiveness. The Japanese auto giant aims to generate 40% of its global sales from EVs by 2025 and 70% by 2030. Over the past five years, Toyota has increased its dividend five times, with an annualized growth rate of 1.84%.
The Zacks Consensus Estimate for TM’s fiscal 2024 sales and EPS implies year-over-year growth of 11% and 45%, respectively. The earnings estimate for fiscal 2024 and 2025 has been revised upward by $1.98 and 5 cents, respectively, in the past 60 days. Over the trailing four quarters, Toyota surpassed earnings estimates on all occasions, the average surprise being 47%. The stock currently carries a Zacks Rank #2 (Buy) and has a VGM Score of A.
Ferrari: Headquartered in Italy, this luxury supercar manufacturer is riding on its pricing power, burgeoning order book, brand recognition and exclusivity, which enable it to register high margins.The introduction of Ferrari's first-ever utility vehicle, the Purosangue, received acclaim for its performance capabilities. The company—valued at around $61 billion— is poised to embrace the electrification landscape. It targets 80% of sales to comprise full-electric and hybrid models by 2030. The company aims to launch 15 new models from 2023 to 2026.
The Zacks Consensus Estimate for RACE’s 2023 sales and EPS implies year-over-year growth of 18.4% and 31.5%, respectively. Sales and EPS estimates for 2024 imply a further uptick of 10.7% and 12.8%, respectively, on a year-over-year basis. Over the trailing four quarters, Ferrari surpassed earnings estimates on all occasions, the average beat being 12%. The stock currently has a Zacks Rank #2 and a Growth Score of B.
O’Reilly: It is a leading specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The company — with a market cap of more than $55 billion — has been generating record revenues for 30 consecutive years on the back of growth in the auto parts market and expansion of the store base. The ramp-up of e-commerce initiatives and the opening of stores and distribution centers in profitable regions are driving the company’s prospects. Strong cash flow generation is supporting the firm’s robust buyback program, thereby boosting investors’ confidence.
The Zacks Consensus Estimate for ORLY’s 2024 sales and EPS implies year-over-year growth of 6% and 11%, respectively. The earnings estimate for fiscal 2023 and 2024 has been revised upward by 1 cent and 16 cents, respectively, in the past 30 days. Over the trailing four quarters, O’Reilly surpassed earnings estimates on all occasions, the average surprise being 4.3%. The stock currently carries a Zacks Rank #2 and has a VGM Score of A.
PACCAR: Headquartered in Washington, PACCAR is one of the leading names in the trucking business, with reputed brands like Kenworth, Peterbilt and DAF. Accelerated efforts toward electrification, connected vehicle services and advanced driver-assistance system options are set to bolster the company’s prospects. PACCAR’s strong balance sheet is complemented by A+/A1 credit ratings assigned by Standard & Poor's and Moody's, respectively.Over the past five years, PACCAR — with a market cap of more than $50 billion — increased its dividend nine times, with an annualized growth rate of 4.98%.
The Zacks Consensus Estimate for PCAR’s 2023 sales and EPS implies year-over-year growth of 20.5% and 56%, respectively. The earnings estimate for fiscal 2023 and 2024 has been revised upward by 6 cents and 15 cents, respectively, in the past 60 days. Over the trailing four quarters, PACCAR surpassed earnings estimates on all occasions, the average surprise being 16%. The stock currently carries a Zacks Rank #2 and has a VGM Score of A.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.