3 Stocks to Avoid due to Supply Chain Issues: Toyota, Weber, and Lam Research
Industrial supply chain disruptions have persisted over the past year, owing to sky-high demand, labor shortages, and increased market uncertainty. And these supply risks are expected to flare up in...
Industrial supply chain disruptions have persisted over the past year, owing to sky-high demand, labor shortages, and increased market uncertainty. And these supply risks are expected to flare up in 2022. So, we think three fundamentally bleak stocks, namely Toyota Motor (TM), Lam Research (LRCX), and Weber (WEBR), are best avoided now. Read on.
Robust demand despite multiple lockdowns worldwide adversely impacted global industrial supply chains. As pandemic-fueled operational challenges continue, supply chain issues are projected to continue in 2022. The challenges surrounding cargo ships, labor shortages and constraints, limited storage space, supply and demand imbalances have been further exacerbating the supply crunch. And market fluctuations driven by the supply chain risks and inflation have had a critical impact on businesses.
According to a study by Flintfox, approximately 39% of businesses cannot keep up with price fluctuations in the market due to the ongoing impact of pandemic, inflation, and supply chain issues. Retail, manufacturing, and consumer goods companies face issues in managing their profit margins and are incurring high losses.
Given this backdrop, we think the shares of Toyota Motor Corporation (TM), Lam Research Corporation (LRCX), and Weber Inc. (WEBR), companies that face major supply chain disruptions, are best avoided now.
Toyota Motor Corporation (TM)
TM designs, develops, manufactures, assembles, and sells passenger vehicles, commercial vehicles, related parts, and accessories. It is headquartered in Toyota, Japan. The company operates in segments that include Automotive; Financial Services; and other segments. TM offers hybrid cars, mid-size cars, luxury cars, sports cars, mini-vehicles, passenger vehicles, commercial vehicles, and auto parts under the Toyota, Camry, Lexus, Crown, Century, GR Yaris, Supra, 4Runner, RAV4, Highlander, and Land Cruise names.
On Feb. 14, 2022, TM's three Ontario manufacturing plants remained closed because of parts shortages stemming from the border disruption from trucker protests. And its West Virginia, Kentucky, and Alabama plants are still facing production disruptions.
On Feb. 11, 2022, TM invested an additional $90 million in two of its U.S. manufacturing facilities, including $73 million in Toyota West Virginia and $17 million in Toyota Tennessee. These investments will increase the transaxle production capacity of the plants. This investment is expected to expand the production of electric vehicles (EVs). However, it might take a while to realize gains from these manufacturing facilities.
In its fiscal 2022 third quarter, ended Dec. 31, 2021, TM's total sales revenues decreased 4.5% year-over-year to ¥7.79 trillion ($67.71 billion). TM's operating income declined 20.6% year-over-year to ¥784.37 billion ($6.82 billion). Its net income declined 5.6% year-over-year to ¥818.84 billion ($7.12 billion). And its earnings per share attributable to Toyota Motor Corporation decreased 4.7% from the year-ago value to ¥57.18.
The $66.61 billion consensus revenue estimate for its fiscal 2022 fourth quarter, ending March 31, 2022, represents a 5.1% year-over-year decline.
The stock declined marginally in price year-to-date and 5.6% over the past month. TM closed yesterday's trading session at $182.23.
TM's POWR Ratings are consistent with this bleak outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TM has a grade of D for Growth. Within the F-rated Auto & Vehicle Manufacturers industry, it is ranked #18 of 69 stocks.
To see additional POWR Ratings (Value, Quality, Stability, Momentum, and Sentiment) for TM, click here.
Lam Research Corporation (LRCX)
LRCX in Fremont, Calif., designs, manufactures, markets, and sells semiconductor processing equipment used in the fabrication of integrated circuits. The company's wide range of products includes ALTUS systems, SABRE electrochemical deposition products, SOLA ultraviolet thermal processing products, Vector plasma-enhanced CVD ALD products, and SPEED gap-fill high-density plasma chemical vapor deposition products.
This month, LRCS introduced a new suite of selective etch products to accelerate chipmakers' 3D roadmaps. LRCS' selective etch portfolio comprises three new products, including Argos, Prevos, and Selis, and will provide an advantage in designing and manufacturing advanced logic semiconductor solutions. LRCS might realize profits after adopting these selective etch tools by the leading chipmakers in the industry.
LRCX's cost of goods sold increased 21.4% year-over-year to $2.25 billion in its fiscal year 2022 second quarter, ended Dec. 26, 2021. LRCX's total operating expenses grew 7.7% year-over-year to $639.78 million for the second quarter. Its net cash outflow from financing activities amounted to $578.10 million.
LRCX's stock has slumped 21.7% in price year-to-date and 12.3% over the past three months. It closed yesterday's trading session at $562.88.
Within the Semiconductor & Wireless Chip industry, it is ranked #44 of 97 stocks.
To see additional POWR Ratings (Growth, Quality, Stability, Value, Sentiment, and Momentum) for LRCX, click here.
Weber Inc. (WEBR)
WEBR is an outdoor cooking company. The Palatine, Ill.-based concern manufactures and distributes outdoor cooking products, accessories, consumables, and services in North America, Europe, Australia, and internationally. WEBR's products include charcoal and gas grills, electric grills, smokers, Weber Connect Smart Grilling Hub, accessories, and services. It sells its products through an omnichannel network, including wholesale, e-commerce, and direct-to-consumer channels.
Last month, WEBR unveiled the first three new products in its 2022 grilling portfolio. The all-new WEBER CRAFTED Outdoor Kitchen Collection is a line of high-quality and interchangeable grillware fused with smart technology, performance engineering, and craftsmanship. However, it is expected to take some time to realize revenue from this launch of new products.
In its fiscal year 2022 first quarter, ended Dec. 31, 2021, WEBR's net sales decreased 8.3% year-over-year to $283.14 million. The company's adjusted income from operations declined 270.3% year-over-year to negative $49.84 million. WEBR's adjusted EBITDA decreased 195.8% year-over-year to negative $36.05 million. In addition, the company's adjusted net income decreased 456.9% from its year-ago value to a negative $46.44 million.
WEBR's EPS is expected to decline 17.9% year-over-year to $0.46 for its fiscal year 2022, ending Sept. 31, 2022.
Shares of WEBR have declined 18.1% in price year-to-date and 24.7% over the past three months. It closed yesterday's trading session at $10.59.
WEBR's POWR Ratings reflect its poor prospects. WEBR has an overall rating of D, which translates to Sell in our POWR Ratings system.
It has a grade of F for Sentiment and a D for Momentum. It is ranked #52 of 62 stocks in the Home Improvement & Goods industry.
Click here to see WEBR's POWR Ratings for Growth, Value, Quality, and Stability.
TM shares were trading at $183.79 per share on Friday morning, up $1.56 (+0.86%). Year-to-date, TM has declined -0.81%, versus a -9.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
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