LKQ-The technological advancement of auto parts manufacturing and the current trend of consumers buying used cars or repairing existing cars instead of buying new cars are driving the development of the auto parts industry. Therefore, we think it might be wise to bet on the fundamentally sound auto parts stocks LKQ Corporation (LKQ) and Goodyear Tire (GT). continue reading.
Consumers tend to buy second-hand cars or repair existing cars instead of buying new ones. Technological advances in auto parts manufacturing and the strengthening of digital sales outlets have driven the surge in demand for auto parts. Assist the development of the auto parts industry. By 2025, the auto parts market is expected to reach US$299.98 billion, with a compound annual growth rate of 2.99%.
High-quality auto parts replacement usually provides car owners with better fuel efficiency, higher durability and acceleration performance. In addition, the new trend of DIY auto parts and products has also promoted the sales of auto parts companies.
Therefore, we think it might be wise to bet on the fundamentally sound auto parts stocks LKQ Corporation (LKQ) and Goodyear Tire & Rubber Company (GT).
LKQ provides replacement parts, components and systems for vehicle repair and maintenance. The Chicago-based company operates through three divisions: LKQ North America; Professional; and LKQ Europe. In addition, it also provides recreational vehicle appliances, towing hooks, truck bedspreads, vehicle protection products, cargo management products, wheels, tires and suspension products.
In July, the board of directors of LKQ approved an increase of US$1 billion in its share repurchase program and an extension of it for two years, bringing the total authorization under the program to US$2 billion and allowing the repurchase to continue until October 25, 2024. This move is a sign of the company's sound financial situation.
In the third quarter ending September 30, 2021, LKQ's sales increased by 8.2% year-on-year to US$3.3 billion. The company's gross profit margin increased by 12.1% over the same period last year, reaching $1.34 million. Its operating income increased by 27.8% year-on-year to USD 37815 million. In addition, the company's net income increased by 46.4% year-on-year to US$28401 million.
LKQ's revenue is expected to increase by 11.8% year-on-year to US$13 billion in fiscal 2021. The company has an impressive history of earnings surprises; it has exceeded consensus earnings per share expectations in each of the past four quarters. The company's earnings per share this year is expected to increase by 51.8%. In addition, LKQ's earnings per share are expected to grow at a rate of 33.5% per year in the next five years. The stock has risen 51.1% in the past nine months and 53.6% in the past year.
LKQ's strong fundamentals are reflected in its POWR rating. The overall rating of the stock is A, which is equivalent to a strong buy in our proprietary rating system. In addition, the quality and sentiment index of the stock is B.
In addition to the POWR ratings I just highlighted, you can also see LKQ's ratings for value, stability, growth, and momentum here. The stock ranks third among 66 stocks in the auto parts industry.
Goodyear Tire & Rubber Company (GT)
GT is a global manufacturer and distributor of tires and related products headquartered in Akron, Ohio. The company provides a variety of rubber tires for automobiles, airplanes, earthmoving and mining equipment, and various other applications under Goodyear, Dunlop, Kelly, Debica, Sava, Fulda and other Goodyear own brands. In addition, GT operates approximately 1,000 retail stores, providing maintenance and other services.
This month, GT and the Stark Regional Transportation Authority (SARTA) collaborated to test smart tire sensors and prototype tires on Sarta's diesel and zero-emission hydrogen fuel cell (HFC) bus fleet. Through this test, GT will obtain valuable data on how tires affect the safety, sustainability and efficiency of public transportation.
As of the third quarter of September 30, 2021, GT's net sales increased 42.4% year-on-year to US$4.93 billion. The company's net income was US$132 million, compared with a net loss of US$2 million in the same period last year. Its earnings per share were US$0.46, while a loss of US$0.01 per share in the third quarter of 2020. In addition, the company's cash and cash equivalents for the six months ended September 30, 2021 were $1.19 billion.
GT's revenue for fiscal year 2021 is expected to increase by 38.7% year-on-year to US$17.1 billion. It has exceeded consensus earnings per share expectations in each of the past four quarters. GT’s earnings per share are expected to grow by 186.9% this year and 51.8% next year. The price of the stock has risen by 64.9% in the past nine months, and it has risen by 120.9% in the past year.
GT's POWR rating reflects this promising outlook. The overall rating of the stock is B, which is equivalent to a buy in our proprietary rating system. In addition, the stock's growth grade is A and its value grade is B.
In addition to the POWR ratings I just highlighted, you can also view GT's ratings for stability, quality, sentiment, and momentum here. GT ranks 16th in the auto parts industry.
Click here to view our 2021 automotive industry report
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On Thursday morning, LKQ's stock price was US$57.51 per share, up US$0.68 (1.20%). Year-to-date, LKQ has risen by 63.91%, while the benchmark S&P 500 index has risen by 25.42% over the same period.
Priyanka is a passionate investment analyst and financial reporter. After obtaining a master's degree in economics, her interest in financial markets prompted her to start her investment research career. more...
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