Lost amidst the earnings reports by such investor favorites as Apple and
Procter & Gamble were the earnings reports of the auto retailers.
I'm not talking about the auto manufacturers like Ford and Toyota. I'm
talking about the retailers who simply sell, and in many cases, repair,
cars and trucks. I was surprised to learn that a handful of these
companies are publicly traded and that some of the retailers have
dealerships all across the country.
A bunch of them recently reported earnings and they didn't just have
good quarters, they had unbelievable quarters. They had the kind of
quarters most businesses only dream about.
Auto Sales Returning To "Normal"
But how is that possible more than three years into the auto recovery?
It's not as as if auto sales haven't been rising the last few years.
Car sales bottomed in 2009 at 10.4 million and have been steadily rising
ever since. Automobile analysts expect 2013 sales of 15.1 million. That
is near a "normal" auto sales market for the United States.
But a perfect combination of improving credit availability with zero
down loans, pent up demand from buyers driving older cars for longer
than they otherwise would have, and a housing market recovery fueling
pick-up sales, has resulted in the best of times for the retailers.
Three Auto Retail Stocks With the Best Fundamentals
Even though the auto stocks have had big run-ups, it's not too late to
get into the sector. Valuations are still attractive. The companies are
also expected to have double digit earnings growth this year as analysts
expect the growth to remain through 2013 and possibly into 2014.
It doesn't get much better than buying both solid fundamentals and big earnings growth.
However, not all of the auto retailers are created equal. These three
auto retailers have the best combination of fundamentals and the Zacks
Rank in the sector. All three are Zacks Rank #2 (Buy) stocks. (more)
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