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Cars Drive an Upswing in U.S. Retail Sales: 5 Top Auto Picks

Auto sales log best rise in three months and give a solid boost to U.S. retail spending numbers in June. This call for bets on top-ranked auto stocks.

U.S. retail sales witnessed a solid rise in June as households boosted spending on various products, while demand for automobiles jumped the highest in three months.

Continued upswing in retail spending for the fifth straight month has raised expectations of robust economic growth in the second half of 2018. Going forward, an impressive workforce market scenario, higher wage rates and lower taxes will likely stuff more money into wallets and keep demand strong.

U.S. consumers are buying more cars and pushing up demand for gasoline as a result. We perceive that the days ahead will likely witness higher demand for motor vehicles and drive gains for automobile and auto-part dealers. Against this opportune backdrop, investing in some of the sought-after auto stocks doesn’t seem to be a bad proposition.

Auto Sales: A Big Boost for Retail

Monday’s Commerce Department report revealed that overall U.S. retail sales in June jumped 0.5% sequentially to $506.8 billion. Retail spending improved 6.6% on a year-over-year basis. May sales were, in fact, revised higher to mirror a 1.3% advance instead of a 0.8% gain previously reported. Eliminating purchases of gasoline and autos, sales climbed 0.3% in June.

Retail sales growth was mostly broad-based in June, with eight out of the 13 major retail categories witnessing a rise in sales.

Auto sales increased 0.9% in June, logging its maximum gain in the last three months. In sync with this, filling-station receipts improved 1% last month, as consumers purchased more gasoline for their new cars. Auto sales and spending at service stations had advanced 0.8% and 2% respectively, in May.

Aggregate sales from motor vehicle and parts dealers advanced 4% year-over-year at the end of first-half of 2018.

What Aided Automobile Spending?

June’s solid retail report signalled that the American economy will likely remain a bustling one in the second half of 2018. Fed’s aggressive stance to introduce additional rate hikes in this year further accentuates this expectation.

June’s retail spending was primarily buoyed by strong automobile demand. New job additions, higher wage rates and a lower tax burden have all led to the upswing.

Job additions continued to be substantial in June, indicating that hiring remains robust even as the economy nears full employment. This metric increased by 0.2 percentage points to 62.9% even as 601,000 individuals chose to re-join the labor force. Meanwhile, average hourly earnings increased by 0.2% to $26.98 an hour last month.

Additionally, Trump’s tax overhaul has raised Americans’ take-home pay. While the top rate of individual income tax brackets got trimmed from 39.6% to 37%, the 33% bracket declined to 32%, the 28% bracket to 24%, the 25% bracket to 22%, and the 15% bracket to 12%.

5 Top Auto Stocks to Buy Now

Household automobile purchases were sturdy last month and will likely continue to escalate on the back of higher disposable income.

In sync with this, apportioning your hard-earned money in select auto stocks will be a wise decision. Below we have handpicked five top-ranked picks that will likely add a sparkle to your portfolio.

These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.

Meritor, Inc. MTOR manufactures and sells integrated systems, components, and modules to aftermarket and original equipment manufacturers for commercial transportation, vehicle, and industrial sectors.

The Zacks Consensus Estimate for earnings has moved up 1.1% to $2.81 per share for fiscal 2018 (ending September 2018), in the last 60 days. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 49.5% and 11.9% for fiscal 2018 and 2019, respectively. Meritor’s shares have gained 14.8% in the past year. The stock sports a Zacks Rank #1 and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Suzuki Motor Corporation SZKMY manufactures and markets motorcycles, automobiles, and power and marine products in the global forum.  

The stock sports a Zacks Rank #1 and has a VGM Score of B. The Zacks Consensus Estimate for earnings has moved up 7% to $18.29 per share for fiscal 2019 (ending March 2019), in the last 60 days. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 7.5% and 5.4% for fiscal 2019 and 2020, respectively. Suzuki Motor’s shares have gained 14.8% in the past year.

Magna International Inc. MGA designs and manufactures automotive systems, modules, assemblies, and components globally.

The stock carries a Zacks Rank #2 and has a VGM Score of A. The Zacks Consensus Estimate for earnings has moved up 1% to $7.06 per share for 2018, in the last 60 days. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 18.5% and 7.5% for 2018 and 2019, respectively. Magna International’s shares have gained 25.4% in the past year.

Visteon Corporation VC designs, engineers and manufactures electronic products for worldwide original equipment vehicle manufactures.  

The stock has a Zacks Rank #2 and VGM Score of A. The Zacks Consensus Estimate for earnings has moved up 0.7% to $7.03 per share for 2018, in the last 60 days. Notably, the projected year-over-year earnings growth rate for the company is currently 14.3% and 13.8% for 2018 and 2019, respectively. Visteon’s shares have gained 19.1% in the past year.

Oshkosh Corporation OSK manufactures and sells vehicle bodies and speciality vehicles globally.

The stock carries a Zacks Rank #2 and has a VGM Score of A. The Zacks Consensus Estimate for earnings has inched up 0.3% to $5.78 per share for fiscal 2018 (ending September 2018), in the last 60 days. Notably, the year-over-year earnings growth rate for the company is currently pegged at 36% and 10% for fiscal 2018 and 2019, respectively. Oshkosh’s shares have gained 7.7% in the past year.

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Magna International Inc. (MGA) : Free Stock Analysis Report
 
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SUZUKI MOTOR CP (SZKMY) : Free Stock Analysis Report
 
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