How About Tapping the EV Era With These 3 Auto Parts Suppliers?
Stay invested in auto equipment suppliers including Meritor (MTOR), BorgWarner (BWA) and Magna (MGA) to reap long-term rewards from transition into EV...
Electric vehicles (EV) have been around way longer than we can imagine, from as early as the 19th century. Interestingly, some of the first cars ever made were electric, with automakers actively exploring options for alternative fuel vehicles, including EVs. However, blame it on politics, or little advancement in technology, or cheap and abundant gasoline, the internal combustion engine won the battle. Fast-forward 100 years, and the tables have turned. EVs are the future of the automobile industry and electrification of a vehicle is now inevitable.
Advancement in technologies, stricter emissions and fuel-economy targets as well as increasing commercial viability of EVs — both in terms of affordability and charging infrastructure — are boosting the e-mobility market. According to IHS Markit, there were nearly 2.5 million EVs sold in 2020 globally and sales are likely to soar 70% in 2021. EVs are expected to witness a CAGR of 53% through 2025, representing 12.2 million annual EVs. No one wants to be left behind during this massive growth narrative. While auto biggies including Tesla TSLA, General Motors GM, Ford F are obvious bets to capitalize on the booming EV market, it would also be prudent to park your capital in a few auto parts suppliers who are actively electrifying their portfolio and are set to benefit from the EV revolution, no matter which automakers emerge as winners.
Below we have highlighted three auto parts suppliers and equipment providers that are set to thrive on the EV transition. The companies are focused on innovation and technology development, and expect that hybrid and electric technologies will bolster their top line, going forward. Ensure that you retain these stocks in your portfolio to reap handsome long-term rewards.
Meritor, Inc. MTOR: Meritor is actively engaged in medium-duty electrification programs. It is constantly securing new business wins, which are driving electrification revenues. Contracts with Lion Electric, Volta Trucks, Hexagon Purus and Autocar for the supply of electric powertrain augur ample growth visibility. We like the recent five-year agreement with Hyliion to provide electric subsystems for its Hypertruck ERX. The company is also working with Hino, which will be evaluating and testing Meritor’s e-powertrain for its development path to zero-emission vehicles. Additionally, investment in SEA Electric gives Meritor an opportunity to apply its expertise in electrification solutions for the medium-duty market. The company currently carries a Zacks Rank #2 (Buy) and has a Value Score of A. The Zacks Consensus Estimate for fiscal 2021 earnings and sales implies year-over-year growth of 118.7% and 28.1%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BorgWarner, Inc. BWA: BorgWarner is likely to benefit from accelerating vehicle electrification, and expects hybrid and electric technologies to be major revenue drivers. From 2022 through 2024, net new backlog is expected to be at least $2.8 billion, with around 45% of the backlog driven by e-products. The company’s new project Charging Forward is expected to deliver more than 25% of revenues from EVs by 2025 and 45% by 2030. Also, the acquisition of AKASOL, completed in June, is set to expand BorgWarner’s commercial vehicle electrification capabilities. AKASOL is expected to add $75 million in BorgWarner’s second-half revenues. BorgWarner currently carries a Zacks Rank #3 (Hold) and has a VGM Score of A. The Zacks Consensus Estimate for 2021 earnings and sales implies year-over-year growth of 53% and 52%, respectively.
Magna International MGA: Magna’s deepened focus on enhancing its portfolio of e-powertrain products offers ample growth visibility. The joint venture with LG Electronics will help Magna expand electric powertrain offerings by capitalizing on the existing engineering expertise and technological capabilities. Magna’s powertrain electrification capabilities with the new eBeam technology would aid it in electrifying pickup trucks without compromising on functionality and capability. The firm’s strategic collaboration with Israeli startup REE Automotive to jointly manufacture and assemble modular EVs is also set to bolster prospects. The auto supplier’s investments in self-driving firm Waymo and electric vehicle maker Fisker showcase its commitment to meet future mobility needs. Magna currently carries a Zacks Rank #3 and has a VGM Score of B. The Zacks Consensus Estimate for 2021 earnings and sales implies year-over-year growth of 83% and 21%, respectively.
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Ford Motor Company (F): Free Stock Analysis Report
BorgWarner Inc. (BWA): Free Stock Analysis Report
Magna International Inc. (MGA): Free Stock Analysis Report
General Motors Company (GM): Free Stock Analysis Report
Meritor, Inc. (MTOR): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
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