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After a record breaking year for car sales in 2016, it hasn’t exactly been the hottest stretch for auto stocks so far this year. What’s more, as investors look ahead to the next generation of cars—one that will be dominated by self-driving technology—it can be easy for today’s trends to get lost in anticipation.

Nevertheless, as we progress further into the second half of 2017, it looks like car stocks could finally be turning a corner. More specifically, foreign manufacturers appear to be driving full steam ahead with a renewed sense of momentum right now.

Indeed, according to the latest data from Germany’s VDA, several key international markets recorded strong growth in auto sales during the month of July. Europe and China notched vehicle registration growth of 1.8% and 5.5%, respectively, and India proved that it is an exciting growth market with year-over-year gains of 15.1%. In fact, the United States was the only major car market in the world with weaker year-over-year results.

And while there may be some sustained weakness in U.S. sales, things are actually shaping up reasonably well for foreign manufacturers here in the States. Based on the Wall Street Journal’s latest data, Toyota’s share of the U.S. market climbed from 14.1% to 15.7% over the past year, while Honda moved from 10% to 10.7% and Nissan added 0.4% to sit at 9.1%.

Furthermore, our “Automotive – Foreign” industry currently sits in the top 5% of the Zacks Industry Rank, and over the past month, this group of companies has gained an average of nearly 2%—outpacing the S&P 500’s 1% dip over that same timeframe.

This group sits so high in the Zacks Industry Rank because 10 out of the 18 stocks that we include in this category currently have a Zacks Rank #2 (Buy) or better ranking. But which foreign auto stocks are the best? Check out the seven Zacks Rank #1 (Strong Buy) foreign carmakers below!

1.       Toyota Motors (TM - Free Report)

Toyota is coming off a positive earnings surprise of 36% and is now expected to post earnings growth of a respectable 2% this fiscal year. On top of that, the company has an “A” grade for Value, as well as an overall VGM grade of “A.” With a beta rating of just 0.62, this stock is hypothetically less volatile than the market average, and Toyota is currently paying out a solid 3.2% dividend—meaning this could be a great pick for income-minded investors as well.

 

2.       Volkswagen AG (VLKAY - Free Report)

Volkswagen missed the Zacks Consensus Estimate in the most recent quarter, put we’ve seen two positive revisions to its current-year and next-year earnings estimates, so the near future still looks bright. On top of that, its P/E ratio of 5.77 is better than the industry average, and its expected sales growth of nearly 14% is impressive. Volkswagen has also posted better-than-average cash flow growth of 15.4%, and its overall VGM grade of “A” further underscores its financial stability.

 

3.       Suzuki Motor Company (SZKMY - Free Report)

Suzuki has been one of the hotter foreign auto stocks recently. Shares have gained more than 5% over the last month, thanks in large part to its strong earnings growth. This recent price movement has helped the stock earn an “A” grade for Momentum, and its growth figures have given it a “B” in the Growth category. Suzuki is also sporting a “B” in the Value category, and we’ve seen positive estimate revisions for its current-quarter, next-quarter, and next-year earnings recently.

 

4.       Renault SA (RNLSY - Free Report)

Renault is another stock with solid fundamental metrics on top of its strong Zacks Rank. The stock has “A” grades for Value and VGM, and its most impressive figures are its better-than-industry average P/CF and P/E ratios. Additionally, Renault is expected to post EPS growth of 58% and sales growth of 24% this fiscal year, which significantly outpace the averages of its industry peers. The company also pays a respectable 3.1% dividend and may be attractive for income investors.

 

5.       Mazda Motor Corporation (MZDAY - Free Report)

In addition to its strong Zacks Rank, Mazda is sporting “A” grades for Value and VGM, as well as a “B” grade for Momentum. The company has a better-than-industry-average RoE, and its P/E and P/B ratios also come in better than its peers. The company recently inked a deal with Toyota to build a new joint venture manufacturing plant in the U.S., which should help its efforts to snag more market share in North America.

 

6.       Honda Motor Company (HMC - Free Report)

Honda surpassed the Zacks Consensus Estimate by more than 25% in its most recent quarter, extending its earnings surprise streak to five. The company has “A” grades for Value, Momentum, and VGM—and it pays a respectable 2.8% dividend. Moreover, the company has been focusing on infrastructural development, new product introductions and car launches in Asia, North and South America—all initiatives that should help with top-line results. Honda is expected to post sales growth of 2.4% this fiscal year.

 

7.       BMW AG (BAMXF - Free Report)

BMW shares have had an up and down year, but the annual fiscal period is expected to result in EPS growth of 17.5% and sales growth of 12.4%. The company’s net margin of 7.6% is nearly three points more than the industry average, and it P/S ratio of 0.53 and P/E ratio of 6.86 are respectable. Furthermore, its cash flow growth has more than tripled its historical average and reached 6.9% this year.

 

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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