The Zacks Analyst Blog Highlights:EOG Resources, Toyota Motor, Volkswagen, Tata Motors and Daimler
CHICAGO, April 17, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the EOG Resources (NYSE:EOG-Free Report), Toyota Motor Corp. (NYSE:TM-Free Report), Volkswagen AG (OTC:VLKAY-Free Report), Tata Motors Ltd (NYSE:TTM-Free Report) andDaimler AG (OTC:DDAIF-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday's Analyst Blog:
"Springtime for Putin"
The crisis in Ukraine and the confrontation with Russia will not automatically bring new U.S. Liquified Natural Gas, 'LNG,' projects through approval, development and commercialization, even in the medium term, let alone substantial, lucrative exports to Western, Black Sea and Baltic LNG import terminals. Nor is such gas entirely available, although politicians, and producers, on both sides of the Atlantic wish it were already so.
Fortunately, many of those import terminals already exist, and could be expanded to accommodate more imports from abroad: Africa, the Middle East, and Latin America, along with (eventually) North America. There is also enough North American supply to send overseas at a profit at the current price differential.
The probability, and the opportunity of more U.S. LNG plants being constructed have certainly increased. The good thing is that there is abundant North American shale and coal bed gas, several pipelines to the Atlantic coast, and many motivated companies with capital eager to fund such projects. However, political support has been lukewarm, particularly in New York State, Quebec and in Washington, DC, but the geopolitical situation could change minds and attitudes, or at least reduce some of the obstacles. Ottawa and Mexico City are entirely onside.
The main beneficiaries continue to be the best shale operators, such as EOG Resources (NYSE:EOG-Free Report), among others.
We're Moving at a Faster Pace
It takes a year or more to get environmental and other approvals, and another two to three years and billions of dollars to construct new LNG liquifaction plants and export terminals. Some players have been burned in the past, and there is no assurance to them that these projects will be as lucrative as they appear on paper. However, nearly twenty of them are already mooted for the U.S. East coast.
Thus far, Canadian action on the Atlantic side has been muted, but two oil pipeline projects with high chances of approval and actual construction are in the works. None of these plans nor the U.S. gas plants, will be fully realized before 2018, at the earliest, so, in the short term, the EU, and the Ukrainians, will be mostly on their own. Nevertheless, as indicated earlier, they are not without options, or bargaining power and resources of their own.
3 Foreign Auto Stocks Ready to Burn Rubber
The surge in auto sales in 2013 and an optimistic outlook for 2014 have put the automobile sector in focus. Global auto sales hit a record high of 82.8 million units in 2013, per the data provided by IHS Automotive.
While most automobile manufacturers were hit hard by the recession, the resultant pent-up demand is working in their favor now that employment rates are improving and consumers have recovered from the impact of the recession.
A plunge in car sales in the years following the recession have led to an all-time high average age of vehicles on U.S. roads of 11.4 years. This is resulting in significant replacement demand. Moreover, with the recovery of global markets, sales in other nations are also improving.
Asian countries, especially China and India, are recording impressive sales growth and are expected to account for a large part of the growth in the auto industry over the next 5 to 7 years. Even the European automobile market is beginning to show improvement.
Globally, 2 of the 3 largest selling automakers in 2013 were non-U.S. companies – Toyota Motor Corp. (NYSE:TM-Free Report) and Volkswagen AG (OTC:VLKAY-Free Report). Moreover, the Auto-Foreign industry has a Zacks Industry Rank of #13 at present, which translates into a Positive outlook. Meanwhile, the Auto-Domestic industry has a Zacks Industry Rank of #99, which refers to a Neutral outlook. Thus, it would be a good idea to invest in some foreign auto stocks that are performing well.
Here are three automakers based outside the U.S. that are looking good at the moment:
Japan-based Toyota is the leading automaker in the world in terms of sales and production. Its product portfolio consists of a full range of models from passenger cars and minivans to trucks as well as related parts and accessories.
Toyota is currently trading at a forward price-to-earnings (P/E) ratio of 8.7x, which is significantly lower than the industry average of 15.6x. It has a price-to-book (P/B) ratio of 1.1x, which is at a discount to the industry average of 2.9x. Even the price-to-sales (P/S) ratio of 0.8x is lower than the industry average of 2.5x.
This Zacks Rank #1 (Strong Buy) stock is expected to report a 55.5% year-over-year growth in earnings per share (EPS) in the fiscal year ended Mar 2014.
Tata Motors Ltd (NYSE:TTM-Free Report) is the largest automobile company in India. It is also the fifth largest truck manufacturer and the fourth largest bus manufacturer in the world.
Tata Motors also has a P/E ratio of 8.5x, which offers a significant discount on the industry average of 15.6x. Its P/B of 2.6x is marginally lower than the industry average of 2.9x. It has a P/S of 0.6x, also below the industry average of 2.5x.
Tata Motors reported a positive earnings surprise in three of the trailing four quarters, with an average beat of 22.68%. This Zacks Rank #1 stock is expected to report 26.6% year-over-year growth in EPS in the fiscal year ended Mar 2014.
Germany-based Daimler AG (OTC:DDAIF-Free Report) manufactures and sells passenger cars, trucks, vans, buses, and related spare parts and accessories. This Zacks Rank #1 stock owns the premium vehicle brand Mercedes-Benz.
Daimler has a P/E ratio of 11.1x, significantly below the 15.6x industry average. Its P/B and P/S of 1.6x and 0.6x, respectively, are also substantially lower than the respective industry averages.
Daimler is expected to report a 16.9% year-on-year surge in EPS in 2014.
Bottom Line
Global automobile sales are expected to rise to 85 million units in 2014, according to IHS Automotive. Even the 100 million unit milestone is not far and is expected to be reached in 2018.
Rising sales should translate into higher gains for auto stocks. Thus, adding some automobile stocks with strong fundamentals and growing earnings to the portfolio might prove to be beneficial for investors.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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