3 Electric Vehicle Supplier Stocks to Consider Adding to Your Portfolio

The electric vehicle (EV) industry has been growing at a hurry-up pace since last year due to favorable government policies and lower recurring costs compared to traditional vehicles. EV supplier companies such as TE Connectivity (TEL), Magna International (MGA), and Lear Corporation (LEA) have been capitalizing on the emerging trend by investing more to develop innovative driver-friendly features and cost-effective products. As a result, their stocks are expected to generate solid returns. Let us explain.

The majority of electric vehicle (EV) stocks has been rallying over the past year as the global automobile industry transforms from traditional, internal-combustion-powered vehicles to electric vehicles. With most countries, including the U.K., Japan and the United States (several regions), planning to ban the sale of new internal combustion  vehicles beginning 2035, the EV industry is expected to dominate the global automobile sector in the next decade.

The global EV market is expected to grow at a CAGR of 40.7% over the next seven years.

Against this backdrop, we believe EV supplier companies TE Connectivity Ltd. (TEL), Magna International, Inc. (MGA), and Lear Corporation (LEA) could  grow significantly.

Click here to checkout our Electric Vehicle Industry Report for 2021

 

TE Connectivity Ltd. (TEL)

Based in Schaffhausen, Switzerland, TEL designs and manufactures connectivity and sensor solutions. The company operates primarily through three segments — Transportation, Industrial and Communications Solutions. Its Transportation Solutions segment offers connectivity and sensor technologies,  while its  Industrial Solutions segment supplies products that connect and distribute power, data and signals. The Communications Solutions segment is a supplier of electronic components for the data and devices and appliances markets.

On March 2 TEL was named as a Clarivate Top 100 Global Innovator 2021, which showcased its long-standing dedication to creating a culture that fosters creativity and ingenuity. In February, TEL has also been named  a one of the 2021 World's Most Ethical Companies by Ethisphere. The company declared a $0.48 per share quarterly dividend for the fiscal 2021 second quarter that was paid on March 5, 2021.

TEL’s net sales for its fiscal 2021 first quarter, ended December 25,  was  $3.52 billion, which represents an 11.2% rise year-over-year. The company’s net income for the quarter came in at $381 million, which represents an improvement of 1365.4% year-over-year. Its non-GAAP total operating income was  $624 million, which represents an improvement of 24.3% year-over-year. And its non-GAAP EPS increased 21.5% year-over-year to $1.47.

A consensus EPS estimate of $1.48 for the quarter ending June 30, 2021 represents an improvement of 150.8% year-over-year. Also,  TEL surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $14.05 billion for the fiscal 2021 represents a 15.4% rise on a year-over-year basis. The stock has gained 74.6% over the past year and closed yesterday’s trading session at $129.41.

TEL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

The stock has a B grade for Growth, Momentum and Sentiment. We have also graded TEL for Stability, Value and Quality. Click here to access all TEL’s ratings.

TEL is ranked #11 of 46 stocks in the A-rated Industrial - Manufacturing Industry.

Magna International, Inc. (MGA)

Based in Aurora, Canada, MGA is a mobility technology company that develops, manufactures, engineers, supplies and sells automotive products. The company  operates mainly through four segments — Body Exteriors & Structures, Power & Vision, Seating System and Complete Vehicles. MGA’s products include sealing systems, active aerodynamics, engineered glass, electronic controllers, seat structures, power closure systems, mechanism & hardware solutions, engineering services and fuel systems.

MGA launched an  all-new connected PHEV drivetrain and next gen battery electric drive systems on March 4. They are expected to reduce greenhouse gas emissions, among other utilities. The company also recently launched new surround view cameras and electronic control units that are expected to be a common feature in the vehicles beginning with the  2022 models.

In February,  MGA announced the construction of a new manufacturing facility in St. Clair, Michigan where battery enclosures for General Motors Company’s (GM) new GMC Hummer EV are expected to be built. The  company has also  confirmed that it is collaborating with Fisker to develop an Advanced Driver Assistance System (ADAS) that is expected to be applied to the Fisker Ocean SUV, which is  expected to be launched in late 2022.

MGA’s net sales increased 12.5% year-over-year to $10.57 billion for the fourth quarter ended December 31, 2020. In the complete vehicles segment, MGA’s sales increased 20.4% year-over-year to $1.76 billion, driven primarily  by higher volumes for  the Jaguar I-Pace, BMW 5 Series and Mercedes Benz G-Class. The company’s net income for the fourth quarter was $738 million, which represents an improvement of 67.7% on a year-over-year basis. Its non-GAAP EPS has increased 100.7% year-over-year to $2.83.

A consensus EPS estimate of $1.81 for the quarter ending June 30, 2021 represents an improvement of 205.8% year-over-year. Also, MGA surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $10.18 billion for the quarter ending June 30, 2021 represents a 145.7% rise on a year-over-year basis. The stock has gained nearly 120% over the past year and closed yesterday’s trading session at $88.01.

MGA’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Sentiment and a B grade for Quality, Value and Momentum. We have also graded MGA for Stability and Growth. Click here to access all of MGA’s ratings.

MGA is ranked #8 of 68 stocks in the A-rated Auto Parts Industry.

Lear Corporation (LEA)

Based in Southfield, Michigan, LEA supplies seating, electrical distribution systems, electronic modules, related subsystems, components and software, to automotive manufacturers. The company operates primarily  through two segments — Seating and E-Systems. The company offers its products and services under several brands including Xevo, GUILFORD, ConfigurE+TM, INTUTM, LEAR CONNEXUSTM, EXOTM, and TeXstyleTM.

In February 2021 LEA declared a quarterly cash dividend of $0.25 per share on the company's common stock, payable on March 23, 2021. The company was also named to FORTUNE magazine’s World’s Most Admired Companies list in February for the fifth consecutive year.

CITGO and LEA’s Xevo have agreed  to connect consumers with more than 4,500 CITGO-branded retail locations through an in-vehicle CITGO app. Also, the company’s Xevo software business partnered with GrubHub Inc. (GRUB) in  January to deliver safer, contactless food ordering capabilities in FCA vehicles via an app on the Uconnect Market connected services platform.

For the fourth quarter ended December 31, 2020, the company’s net sales increased 8.8% year-over-year to $5.24 billion. Its net sales from the North America region increased 13.2% year-over-year to $1.97 billion and net sales  from its  Asia region increased 6.3% year-over-year to $1.13 billion. Its core operating earnings was  $329.70 million, up 36.7% year-over-year. While the company’s adjusted net income increased 37.7% year-over-year to $221.30 million, its adjusted EPS increased 38.6% year-over-year to $3.66.

A consensus EPS estimate of $13.75 for its  fiscal 2021 represents an improvement of 158% year-over-year. Moreover, LEA surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $5.14 billion for the next quarter, ending June 30, 2021, represents a 138.1% rise from the same period last year. The stock has gained 94.9% over the past year and closed yesterday’s trading session at $178.96.

It’s no surprise that LEA has an overall rating of B, which equates to Buy in our POWR Ratings system. The stock has a B grade for Growth, Momentum and Value also. We have also graded LEA for Stability, Sentiment and Quality. Click here to access all of LEA’s ratings.

LEA is ranked #19 in the Auto Parts Industry.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

 

Click here to checkout our Electric Vehicle Industry Report for 2021

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TEL shares were unchanged in after-hours trading Wednesday. Year-to-date, TEL has gained 7.85%, versus a 4.20% rise in the benchmark S&P 500 index during the same period.



About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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