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Toyota (TM) to Pour Billions into U.S. Over Next 5 Years

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Share price of Toyota Motor Corporation (TM - Free Report) increased marginally to $119.76 after the company announced plans to invest $10 billion in the U.S. over the next five years. The investments will be utilized to fund the construction of the company’s new North American headquarters in Texas and to upgrade a few plants to meet the rise in demand for fuel efficient vehicles.

Toyota is focused on expanding some of its plants in the U.S in the next five years. However, the automaker did not provide any details on the employment opportunities the expansion drive will create.

Meanwhile, Toyota has been facing criticism from President-elect Donald Trump due to its plans to shift production of Corolla to Mexico from Canada. The company stated that it supports the President-elect’s goal to boost production and employment in the U.S. Though the company has extensive manufacturing operations in the U.S., it runs a global business and thus needs to be competitive. If a border adjustability tax is levied, it will unnecessarily raise vehicle prices, per Toyota’s North America Chief Executive Jim Lentz.

Price Performance

Toyota has underperformed the Zacks categorized Auto-Manufacturers-Foreign industry over a year. Share price of the company increased 3.4% over the past one year while the industry saw a 6.2% increase. This was largely due to the slashed guidance for earnings, operating income and revenues for fiscal 2017. Settlement of a U.S. truck lawsuit, string of product recalls and declining sales outside Japan also affected the share price.

Zacks Rank & Key Picks

Toyota currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Oshkosh Corporation (OSK - Free Report) , Fox Factory Holding Corp (FOXF - Free Report) and GKN plc . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory has an expected earnings growth rate of around 16.6% for the current year. Oshkosh has a long-term growth rate of 8.4% while the same for GKN is pegged at 6.3%.

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