On a positive note, auto parts manufacturing space has witnessed a surge in demand with increasing sales over the past few years. Rise in new car sales encouraged ramped-up vehicle production, leading to sales growth for the companies that engage in auto parts manufacturing.
The Zacks Industry Rank for Automotive – Original Equipment is #72 (placing it at the top 27% of the 250 plus Zacks classified industries).
A few major U.S.-based companies in this space are Dana Incorporated (DAN – Free Report) , Tenneco Inc. (TEN – Free Report) , BorgWarner Inc. (BWA – Free Report) and Magna International, Inc. (MGA – Free Report) .
Of the four, both Dana and BorgWarner hold a Zacks Rank #2 (Buy), while Magna and Tenneco carry a Zack Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Auto parts manufacturing is likely to get a boost in demand as a result of increased focus on the launch of autonomous and electric vehicles.
Also, to comply with emission standards, demand for fuel efficient components will amplify, benefitting the manufacturers in turn.
Now let’s do a comparative analysis on two original equipment manufacturing company stocks i.e. Dana and BorgWarner to figure out the more attractive pick of the two.
For valuation, we are considering price/earnings (P/E) ratio, which measures a stock’s current share price relative to its per-share earnings. A low P/E ratio reveals that a stock’s price has declined or its earnings performance has improved. Stocks with low P/E tend to be better options than others.
In the trailing 12 months, Dana’s P/E ratio is 12.7x, whereas that of BorgWarner is 14.3x.
The dividend yield for BorgWarner has been higher than Dana. The yield percentage of BorgWarner is 1.27, while the same for Dana is 0.75.
Earnings Estimate Revisions
Over the last three months, Dana’s stock has seen the Zacks Consensus Estimate for quarterly and annual earnings being revised 14.9% and 4.3% upward, respectively. Whereas BorgWarner’s stock has seen the Zacks Consensus Estimate for quarterly and annual earnings being raised 6.3% and 3.8%, respectively.
Earnings Surprise History
Evaluating the surprise history recorded by both the companies, we conclude that both Dana and BorgWarner outpaced their respective Zacks Consensus Estimate in each of the trailing four quarters. However, the former’s average positive earnings surprise is 38.94%, while the latter’s average beat is 6.65%.
In the last six months, Dana’s shares have rallied 42.9% while the BorgWarner stock has gained 21%. Though both the stocks have outperformed the industry it belongs to, Dana scored better with a higher percentage.
Among various metrics for review, BorgWarner fares better than Dana on one count. However, with respect to all other criteria for consideration, including valuation, earnings estimate revisions, earnings surprise history and share price movement, Dana surfaces as a more apt choice for investors than BorgWarner.
Zacks Editor-in-Chief Goes “All In” on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.