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Auto Roundup: MGA & STLA Buyout Deals, KMX's Quarterly Results & More

Last week, the European Automobile Manufacturers Association released data for commercial car registrations for November and the first 11 months of 2022. The European Union (EU) commercial vehicle market inched down 0.6% last month, representing the 17th straight month of decline. While sales of trucks improved from the year-ago month, van and bus sales declined. While registrations in Germany and Spain rose 14% and 0.9%, respectively, France and Italy recorded a 7% and 13.7% fall in sales. For the first 11 months of 2022, commercial vehicle registrations in the EU declined 15.5% to 1.5 million units. Registrations in all the major EU markets fell, with Spain witnessing the sharpest decline of 19.2%. Sales in France, Germany and Italy fell 18.1%, 12.8% and 10.7%, respectively, year over year.

On the news front, the largest used vehicle retailer in the United States, CarMax Inc. KMX unveiled its quarterly results, with both revenues and earnings missing estimates as well as falling year over year. Automotive equipment provider Magna International MGA is set to rev up the ADAS business with a $1.5 billion deal to acquire the Veoneer Active Safety business. Meanwhile, auto biggie Stellantis STLA completed the takeover of aiMotive and announced plans to acquire a stake in Symbio. Electric vehicle (EV) behemoth Tesla TSLA drew attention as it increased discounts on Models 3 and Y to push year-end sales. Meanwhile, U.S. legacy automaker General Motors GM made headlines with the issue of the recall of 140,000 Chevrolet Bolt EVs.

Last Week’s Top Stories

CarMax reported third-quarter fiscal 2023 (ended Nov 30, 2022) net earnings per share of 24 cents, lagging the Zacks Consensus Estimate of 58 cents amid lower-than-anticipated revenues across all segments. The bottom line also fell from $1.53 per share recorded in the year-ago period. The auto retailer registered revenues of $6,506 million for the November-end quarter, which fell short of the Zacks Consensus Estimate of $7,128 million. The top line also contracted 23.7% year over year.

The firm had cash/cash equivalents and long-term debt of $688.6 million and $1,937.1 million, respectively, as of Nov 30, 2022. CarMax now envisions fiscal 2023 capex to be around $450 million, lower than $500 million estimated earlier. As of Nov 30, 2022, it had $2.45 billion remaining under the share repurchase authorization. The company opened one new store in Oceanside, CA during the fiscal third quarter. KMX — carrying a Zacks Rank #3 (Hold) — currently operates more than 230 used car stores. In fiscal 2023 and 2024, CarMax targets to open 10 and 5 stores, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Magna inked a deal to acquire Veoneer Active Safety business from SSW Partners in a bid to fortify its Advanced Driver Assistance Systems (ADAS) business. This all-cash deal is valued at more than $1.5 billion. Subject to regulatory approvals and satisfactory conditions, the transaction is scheduled to be closed by mid-2023. The acquisition is in sync with Magna’s Go-Forward strategy, which focuses on strengthening investments in high-growth areas. The deal builds on Magna’s ADAS business strength and seeks to enhance its portfolio with the addition of complementary products, thereby positioning the company to become the leading full-service ADAS provider.

Notably, Veoneer Active Safety 2022 sales are envisioned at around $1.1 billion and are expected to rise around $1.9 billion by 2024. In combination with Magna, the business is expected to witness pro-forma ADAS sales of around $1.8 billion in 2022 and $3 billion in 2024. The acquisition would add significant engineering and software resources along with broadening the company’s customer base and geographical foothold. MGA’s sharp focus on augmenting ADAS technology offers ample growth visibility.

Stellantis announced that it is set to acquire a stake in Symbio in a bid to accelerate the development of hydrogen mobility offerings as part of its Dare Forward 2030 plan.  Symbio is a Michelin-based hydrogen company, with a leadership position in fuel cell technologies for the mobility industry. Stellantis’ CEO Tavares said, “Symbio’s technical roadmap perfectly matches with Stellantis’ hydrogen roll-out plans in Europe and the United States.” Subject to satisfactory closing conditions and regulatory approvals, the transaction is scheduled for closure in the first semester of 2023.

The company also announced the completion of the buyout of aiMotive to rev up its autonomous vehicle game. aiMotive will operate as a subsidiary of Stellantis and will further strengthen the company’s autonomous driving tech platform, STLA AutoDrive. Last week, Stellantis also announced the ramp-up of production of its all-new M3 electric motors at its manufacturing plant in Trémery, France. The production capacity is anticipated to cross 1 million electric motors per year by 2024. As part of Dare Forward 2030, Stellantis targets 100% of its passenger car sales in Europe to be electric by the end of the decade.

General Motors will recall 140,000 Chevrolet Bolt EVs over fire risks in the United States and Canada. The recall comprises 120,000 Chevy Bolt EVs in the United States and 20,000 in Canada. The recall would address a potential fire risk after a crash where a front seat belt pretensioner deploys. Model year vehicles between 2017 and 2023 will be covered. Dealers will install metal foil along the carpet near the pretensioner exhaust. This marks the second recall in December.

A few days prior to this recall, the U.S. auto giant drew attention with the recall of more than 825,000 vehicles to fix the headlight issue. The affected vehicles include 2022 and 2023 Cadillac Escalade, Chevrolet Silverado 1500, Chevrolet Suburban and Tahoe, GMC Sierra 1500 and GMC Yukon SUVs, Cadillac CT4s and CT5s from the 2020 to 2023 model years, as well as Buick Envisions from 2021 to 2023. Per the company, the daytime running lights may not turn off when the headlights are on, which can cause glare for other drivers, thereby escalating crash risk. Dealers will update the software and owners will be notified from Jan 23.

Tesla doubled discounts on its Model 3/Y vehicles, in a telling sign that the demand for EVs is starting to take a hit with consumer confidence getting crushed by rising interest rates, stubborn inflation and growing risks of economic slowdown. Last week, the EV behemoth upped discounts on its most popular models — Model 3 and Model Y— to $7,500, from a $3,750 discount offered earlier this month. The Model 3 and Y now have an effective base price of $40,690 and $59,690, respectively.

Along with the discount, Tesla is also offering up to 10,000 miles of Supercharging credits for customers who would take deliveries by Dec 31. Despite supply-chain snarls, Tesla has managed to deliver a record number of vehicles so far this year. Despite lagging demand and reportedly high inventory, the company looks poised to cross its 2021 production and delivery numbers. The discount has come at an opportune time as the holiday season marks the busiest shopping season of the year. The unexpected year-end discount should help Tesla boost its fourth-quarter sales.

Price Performance

The following table shows the price movement of some of the major auto players over the last week and six-month period.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

What’s Next in the Auto Space?

Industry watchers will keep a tab on U.S. vehicle sales data for December as well as fourth-quarter and full-year 2022.

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Magna International Inc. (MGA) : Free Stock Analysis Report

General Motors Company (GM) : Free Stock Analysis Report

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Stellantis N.V. (STLA) : Free Stock Analysis Report

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