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3 Mid-Cap Auto Shares to Purchase Forward of Earnings

The U.S. auto {industry} had one other uncommon yr in 2021. The continuing impacts of Covid-19 and world microchip shortages turned what was alleged to be a yr of restoration right into a wild trip for many auto dealerships.

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People who had been in a position to safe valuable provides of semiconductors, metal, and even tires rebounded effectively. Others that misplaced out on the auto manufacturing provide derby suffered one other tough yr.

Waiting for 2022, a few of the identical challenges could also be round for some time. The excellent news is that they’re anticipated to subside because the yr rolls on. The even higher information is that underlying shopper demand for each new and used autos stays sturdy within the pandemic economic system. The perceived security and suppleness of proudly owning a automobile or truck in a interval of mass flight cancellations is driving many Individuals to bolster their private transportation fleet.

As fourth-quarter earnings season rolls on, we’ll be taught extra about what went proper and flawed on the tail finish of the auto {industry}’s yr. Extra importantly, we’ll discover out which corporations are feeling good about 2022.

These are three mid-cap auto retailers which might be prone to be within the driver’s seat for a powerful yr.

Will Lithia Motors Beat This autumn Earnings?

Lithia Motors (NYSE:LAD) studies fourth-quarter and full-year outcomes earlier than the opening on February 9th. The consensus estimate for This autumn earnings per share (EPS) is $10.14 which might symbolize 86% year-over-year progress.

The diversified auto seller is coming off a powerful third quarter during which EPS of $11.21 trounced the Road’s forecast and fueled the inventory’s run above $350. Since then, nonetheless, Lithia Motors has been hampered by industry-wide considerations over lingering chip shortages and the emergence of on-line auto retailers.

But there’s purpose to consider Lithia will exceed quarterly expectations once more and construct off a powerful 2021 efficiency. Gross sales are forecast to rise 14% this yr because of bettering inventories on the firm’s 209 areas and an rising e-commerce presence of its personal.  

Primarily based on projections for 2021 earnings, Lithia Motors has a P/E ratio under 8x. Search for a optimistic This autumn earnings shock and shiny 2022 outlook to push this valuation into one other gear.

Will Penske Automotive Group Inventory Go Up?

Penske Automotive Group (NYSE:PAG) is a well-recognized title to many buyers who’ve been within the auto retail enterprise for greater than 30 years and roots that return to the times when Roger Penske burst on the U.S. transportation scene.

Recently, it has benefitted from a transportation revival of one other kind. As North America’s largest Freightliner seller, Penske Automotive Group’s income took off this yr amid elevated trucking exercise.

Don’t be mistaken although, a pointy rebound in Penske’s auto retail enterprise is main the best way. Turbocharged demand for its most premium car lineup has the corporate on observe to ship 26% income progress and greater than double its EPS in 2021.

On February 9th, we’ll get the ultimate say on Penske’s full-year efficiency. After recording EPS of $4.47 in every of the final two quarters, the bar is about excessive for This autumn. To not fear. Primarily based on the momentum within the enterprise, a sixth consecutive quarterly earnings beat is probably going. This together with a positive 2022 view might drive the inventory to contemporary file highs.

When Does Group 1 Automotive Report?

Group 1 Automotive, Inc. (NYSE:GPI) is likely one of the nation’s prime auto retailers but in addition has a stable presence within the U.Ok. and Brazil. Like different sellers, the corporate’s new car gross sales progress has been anemic as a result of world chip shortages. However, its used car enterprise is flourishing with automobile consumers clamoring to get their arms on pre-owned wheels within the absence of enough new automobile inventories.

Final quarter, Group 1 Automotive’s used retail and wholesale revenues had been up 44% and 26%, respectively, and mixed to account for practically 40% of complete income. By comparability, they accounted for about 30% in 2020 and a smaller proportion pre-pandemic.

When Group 1 studies fourth-quarter outcomes earlier than the market opens on February 10th, the Road will likely be on the lookout for EPS of $9.07. The anticipated 60% year-over-year progress is predicted to be pushed by reopened dealerships, but in addition a stronger omnichannel gross sales mannequin and concentrate on value administration.

With $1.3 billion of long-term debt on the books, Group 1 nonetheless has work to do to enhance its stability sheet. But because the {industry} continues to get well and the supply of latest autos improves, money movement ought to get higher. Lengthy-term buyers prepared to trip out a bumpy begin to the yr stand to see some important horsepower as the present 5x P/E expands.

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