September Auto Sales Rev Up Post Hurricanes: 5 Picks

U.S. auto sales rebounded in September following a prolonged period of year-over-year declines. General Motors Company (NYSE:GM) and Ford Motor Company’s (NYSE:F) pickups and popular crossovers along with Toyota Motor Corp’s (NYSE:TM) SUVs primarily boosted the sales figures.

Americans bought cars and light trucks at the fastest rate in a dozen years in September as consumers in hurricane-hit areas of the country replaced flood-damaged cars. The momentum is expected to continue as many are still on the lookout for better bargains. Given the positive trends, investing in stocks related to the auto industry seems sensible.

Harvey & Irma Drive Automakers’ September Sales

The auto industry reversed a year-long downward trend and posted solid uptick in car sales in September. According to Autodata Corp, the seasonally adjusted annual sales rate for all U.S. light vehicles touched 18.57 million units last month, up from 16.14 million in the prior month. It also marked the highest sales rate since July 2005.

Auto sales increased as many drivers in hurricane-affected locations, in particular Texas, replaced damaged cars. Almost 500,000 cars were destroyed after hurricane Harvey, the first major hurricane to hit the U.S. mainland in almost 12 years, had put vast areas under water. As per industry estimates, around 200,000 cars were damaged during hurricane Irma that had hit the Sun Shine state of Florida.

Several analysts predicted that such hurricanes would help automakers register their first monthly gain this year. Chief investment strategist at Cascend Securities, Eric Ross added that car sales may increase in the later part of 2017 and beginning of 2018. This is because many have been mulling over the purchase of new automobiles since May. Such online activities are primarily done three to four months before the real purchase takes place.

GM, Ford, Toyota Lead Rebound in Car Sales

The three largest sellers in the United States – General Motors, Ford Motor and Toyota – posted strong sales numbers in September following months of declines. Honda Motor Co., Ltd. (NYSE:HMC) and Nissan Motor Co., Ltd. (OTC:NSANY) also posted higher-than-expected sales.

General Motors – The No. 1 U.S. automaker led the pack with 279,176 cars and trucks sold in the United States in September, up 11.9% on a year-over-year basis. This represented a nearly 12% jump in sales compared to the same period last year. Such a feat was possible owing to a 43% increase in sales of crossovers and 10% uptick in pickup trucks, which overshadowed an 11% decline in passenger cars. Kurt McNeil, U.S. vice president of GM’s sales operations said that “our new crossovers from Chevrolet, Buick, GMC and Cadillac have been very well-received, and Chevrolet had an outstanding month with the Silverado and Colorado.”

General Motor’s inventory level dropped to 76 days supply in September from 88 days in August. This is a positive, especially, when analysts criticized the automaker for having oversupply of new vehicles. In fact, General Motors claimed that it will reduce its inventory level further to 70 days by the end of the year.

Ford – The automaker sold 221,643 vehicles in total, gaining 8.9% on a year-over-year basis. Its F-Series pickup sales surged 21.4%, with 82,302 trucks sold. Demand for its Super Duty, with the premium Lariat, King Ranch and Platinum trim levels, remained strong.

Ford added that sales of its Explorer, Sport and SportTrac SUVs totaled 21,207. Mark LaNeve, Ford vice president, U.S. marketing, sales and service added that their “business was strong nationwide, with retail increases in 12 of our 21 sales regions, with particular strength in Houston.”

Toyota – The automaker sold 226,632 cars in total, up 14.9% on a year-over-year basis. The automaker’s gains were broad based, with its RAV4 compact SUV climbing 44% after a new Canadian assembly plant gained momentum. Sales of its flagship product Camry also jumped after the Georgetown, KY, assembly plant switched to a new generation of vehicle manufacturing methods.

Toyota’s light trucks, including Tundra, Tacoma, Highlander and 4Runner, gained as well. Overall, the segment rose nearly 29%. David Christ, vice president of U.S. sales for the Toyota brand, said that last month sales had got a “significant boost right away” from post-hurricane recovery efforts, especially, in Texas.

Here’s a look at how other two major players performed in September:

(Source:Bloomberg)

5 Solid Choices

With U.S. car sales gaining momentum on post-hurricane vehicle demand, it would be prudent to invest in certain stocks related to the auto industry. We have, thus, selected stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Fox Factory Holding Corp (NYSE:F) is a designer, manufacturer and marketer of suspension products used primarily for on-road vehicles. The company, which is part of the Zacks Automotive - Domestic industry, has a Zacks Rank #2.

The Zacks Consensus Estimate for its current-year earnings increased 4.2% over the last 90 days. The company’s expected growth rate for the current and next year are 21.4% and 11.2%, respectively.

PACCAR Inc (NASDAQ:PCAR) is a global technology company engaged in the design, manufacture and customer support of premium light, medium and heavy-duty trucks. The company, which is part of the Zacks Automotive - Domestic industry, carries a Zacks Rank #2.

The Zacks Consensus Estimate for its current-year earnings increased 6.4% over the last 90 days. The company’s expected growth rate for the current and next year are 3.3% and 10.8%, respectively.

Dana Incorporated (NYSE:DAN) is provider of technology driveline, sealing and thermal-management products. The company’s operating segment consists of Light Vehicle Driveline Technologies and Commercial Vehicle Driveline Technologies. The company, which is part of the Zacks Automotive - Original Equipment industry, has a Zacks Rank #2.

The Zacks Consensus Estimate for its current-year earnings increased 19.5% over the last 90 days. The company’s expected growth rate for the current and next year are 20.1% and 8.3%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meritor, Inc. (NYSE:MTOR) supplies drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets. The company, which is part of the Zacks Automotive - Original Equipment industry, has a Zacks Rank #1.

The Zacks Consensus Estimate for its current-year earnings rose 19.7% over the last 90 days. The company’s expected growth rate for the current and next year are 3.7% and 37.9%, respectively.

Ferrari N.V. (NYSE:RACE) is engaged in designing, manufacturing and selling of sports cars. The company, which is part of the Zacks Automotive - Original Equipment industry, has a Zacks Rank #1.

The Zacks Consensus Estimate for its current-year earnings rose 10.8% over the last 90 days. The company’s expected growth rate for the current and next year are 23.5% and 13.3%, respectively.

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