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Here's Why You Should Retain Nissan Stock in Your Portfolio
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Key Takeaways
Nissan's U.S. retail sales rose more than 9%, led by strong Pathfinder, Frontier and Rogue demand.
Nissan targets JPY 500 billion in Re:Nissan cost reductions by the end of fiscal 2026.
China weakness and higher aluminum, copper and oil-related costs weigh on Nissan's outlook.
Nissan Motor Co., Ltd. (NSANY - Free Report) is poised to benefit from U.S. sales momentum, Rogue Hybrid launch, Re:Nissan cost savings and improving free cash flow provide support. However, weaker China demand, Middle East uncertainty, lower volume guidance and elevated raw material costs remain key headwinds.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Strength in U.S. Business, Re:Nissan Program Aids Nissan
Nissan’s U.S. business is showing solid momentum. U.S. retail sales increased more than 9% year over year in the first quarter, supported by strong demand for the Pathfinder, Frontier and Rogue. Pathfinder sales rose 32%, while Frontier deliveries increased 35% and Rogue sales climbed nearly 39%. Nissan plans to continue emphasizing locally produced, tariff-free and profitable vehicles in North America. This combination of improving sales and localized production could support revenue quality and profitability.
The automaker has unveiled the 2027 Rogue Hybrid, adding an electrified variant to its best-selling U.S. crossover lineup. The hybrid is designed to improve power, fuel efficiency and performance, with sales starting in fall 2026. Nissan expects the launch to help maximize U.S. production capacity and move toward three-shift operations. The full lineup, including SV, SR and Platinum trims, arrives in early 2027, with pricing starting at $35,490.
Nissan is making measurable progress on its Re:Nissan cost-transformation program. The company recognized JPY 60 billion of fixed and variable cost savings in the first quarter, taking the cumulative impact from Re:Nissan actions to about JPY 315 billion when combined with fiscal 2025 reductions. Nissan has already achieved its target of reducing engineering cost per hour by 20%, three quarters ahead of schedule. The company remains committed to reaching JPY 500 billion of cost reductions by the end of fiscal 2026. Continued savings could lower Nissan’s breakeven point and help offset pressure from raw materials, logistics and weaker volumes.
Nissan’s financial position provides some support while it executes the restructuring and product initiatives. Automotive free cash flow improved nearly JPY 67 billion year over year in the first quarter; the underlying improvement was about JPY 100 billion after excluding one-time impacts. Nissan ended the prior period with approximately JPY 970 billion of net cash and more than JPY 2.1 trillion in automotive cash and cash equivalents.
The company expects automotive free cash flow to be positive for the full fiscal year, excluding the cash impact of tariffs, supported by stronger second-half business activity, additional cost reductions and new products. This liquidity gives Nissan resources to fund its transformation.
Challenges in China & Middle East Ail NSANY
Nissan reduced its fiscal 2026 sales volume outlook to 3.15 million units and production outlook to 2.8 million units, primarily because of deteriorating industry conditions in China and continued Middle East uncertainty. In China, total industry volume declined 22% year over year in the first half, while Nissan’s sales fell 15%, despite outperforming the broader market and gaining modest market share. The company is also facing a rapid shift from internal-combustion vehicles toward NEVs, requiring Nissan to adjust its inventory and product mix quickly.
Elevated raw material prices remain a significant profitability headwind for Nissan. In the first quarter, higher costs for aluminum and copper reduced operating profit by JPY 24 billion, while broader inflation had an additional JPY 14 billion negative impact. The company expects continued pressure from aluminum, copper and oil-related materials because purchasing prices remain elevated. Competitors are increasing prices, meaning the industry environment remains fluid. Sustained raw material inflation could therefore limit margin expansion.
Price Performance, Valuation and Estimates
Nissan has underperformed the Zacks Automotive - Foreign industry in the past six months. Its shares have lost 10.8% compared with the industry’s decline of 10.1%.
Image Source: Zacks Investment Research
From a valuation perspective, NSANY appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.55, lower than the industry’s 0.84.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Nissan’s fiscal 2026 and 2027 EPS has improved 4 cents and declined a penny, respectively, in the past 60 days.
The Zacks Consensus Estimate for MBLY’s 2026 sales and earnings implies year-over-year growth of 5.6% and 36.1%, respectively. The EPS estimate for 2026 and 2027 has improved 3 cents each over the past 60 days.
The Zacks Consensus Estimate for GTX’s 2026 sales and earnings implies year-over-year growth of 7.2% and 25.7%, respectively. The EPS estimate for 2026 and 2027 has improved 10 cents each over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Here's Why You Should Retain Nissan Stock in Your Portfolio
Key Takeaways
Nissan Motor Co., Ltd. (NSANY - Free Report) is poised to benefit from U.S. sales momentum, Rogue Hybrid launch, Re:Nissan cost savings and improving free cash flow provide support. However, weaker China demand, Middle East uncertainty, lower volume guidance and elevated raw material costs remain key headwinds.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Strength in U.S. Business, Re:Nissan Program Aids Nissan
Nissan’s U.S. business is showing solid momentum. U.S. retail sales increased more than 9% year over year in the first quarter, supported by strong demand for the Pathfinder, Frontier and Rogue. Pathfinder sales rose 32%, while Frontier deliveries increased 35% and Rogue sales climbed nearly 39%. Nissan plans to continue emphasizing locally produced, tariff-free and profitable vehicles in North America. This combination of improving sales and localized production could support revenue quality and profitability.
The automaker has unveiled the 2027 Rogue Hybrid, adding an electrified variant to its best-selling U.S. crossover lineup. The hybrid is designed to improve power, fuel efficiency and performance, with sales starting in fall 2026. Nissan expects the launch to help maximize U.S. production capacity and move toward three-shift operations. The full lineup, including SV, SR and Platinum trims, arrives in early 2027, with pricing starting at $35,490.
Nissan is making measurable progress on its Re:Nissan cost-transformation program. The company recognized JPY 60 billion of fixed and variable cost savings in the first quarter, taking the cumulative impact from Re:Nissan actions to about JPY 315 billion when combined with fiscal 2025 reductions. Nissan has already achieved its target of reducing engineering cost per hour by 20%, three quarters ahead of schedule. The company remains committed to reaching JPY 500 billion of cost reductions by the end of fiscal 2026. Continued savings could lower Nissan’s breakeven point and help offset pressure from raw materials, logistics and weaker volumes.
Nissan’s financial position provides some support while it executes the restructuring and product initiatives. Automotive free cash flow improved nearly JPY 67 billion year over year in the first quarter; the underlying improvement was about JPY 100 billion after excluding one-time impacts. Nissan ended the prior period with approximately JPY 970 billion of net cash and more than JPY 2.1 trillion in automotive cash and cash equivalents.
The company expects automotive free cash flow to be positive for the full fiscal year, excluding the cash impact of tariffs, supported by stronger second-half business activity, additional cost reductions and new products. This liquidity gives Nissan resources to fund its transformation.
Challenges in China & Middle East Ail NSANY
Nissan reduced its fiscal 2026 sales volume outlook to 3.15 million units and production outlook to 2.8 million units, primarily because of deteriorating industry conditions in China and continued Middle East uncertainty. In China, total industry volume declined 22% year over year in the first half, while Nissan’s sales fell 15%, despite outperforming the broader market and gaining modest market share. The company is also facing a rapid shift from internal-combustion vehicles toward NEVs, requiring Nissan to adjust its inventory and product mix quickly.
Elevated raw material prices remain a significant profitability headwind for Nissan. In the first quarter, higher costs for aluminum and copper reduced operating profit by JPY 24 billion, while broader inflation had an additional JPY 14 billion negative impact. The company expects continued pressure from aluminum, copper and oil-related materials because purchasing prices remain elevated. Competitors are increasing prices, meaning the industry environment remains fluid. Sustained raw material inflation could therefore limit margin expansion.
Price Performance, Valuation and Estimates
Nissan has underperformed the Zacks Automotive - Foreign industry in the past six months. Its shares have lost 10.8% compared with the industry’s decline of 10.1%.
Image Source: Zacks Investment Research
From a valuation perspective, NSANY appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.55, lower than the industry’s 0.84.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Nissan’s fiscal 2026 and 2027 EPS has improved 4 cents and declined a penny, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the auto space are Mobileye Global Inc. (MBLY - Free Report) and Garrett Motion Inc. (GTX - Free Report) . While MBLY sports a Zacks Rank #1 (Strong Buy), GTX has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MBLY’s 2026 sales and earnings implies year-over-year growth of 5.6% and 36.1%, respectively. The EPS estimate for 2026 and 2027 has improved 3 cents each over the past 60 days.
The Zacks Consensus Estimate for GTX’s 2026 sales and earnings implies year-over-year growth of 7.2% and 25.7%, respectively. The EPS estimate for 2026 and 2027 has improved 10 cents each over the past 60 days.