In this article, I have assessed two top auto stocks Tesla, Inc. (TSLA) and Oshkosh Corporation (OSK), to identify the better value investment. However, before delving into their details, let's examine the landscape of the auto sector.
S&P Global Mobility predicts global new vehicle sales to hit 88.30 million this year, marking a 2.8% increase from the previous year. The recovery in light vehicle output is driven by inventory restocking efforts, supported by pent-up consumer demand. Moreover, fueled by the prevalence of EVs, rising urbanization and infrastructure investment, and safety innovations, the global automotive industry is expected to reach $6.86 trillion by 2033, expanding at a CAGR of 6.8%.
Besides, the Biden-Harris Administration allocated $15.50 billion to aid the transition to electric vehicles, supporting factory retooling and job retention. This includes $2 billion in grants and up to $10 billion in loans for automotive manufacturing conversions, as well as plans for a $3.50 billion investment in domestic battery manufacturing.
Given this backdrop, let’s delve into a comparative analysis of two Auto & Vehicle Manufacturers stocks, Tesla, Inc. (TSLA) and Oshkosh Corporation (OSK), and analyze which stock presents a better value for investors.
The Case for Tesla, Inc.
Tesla, Inc. (TSLA) designs, develops, manufactures, leases, and sells electric vehicles and energy generation and storage systems worldwide. It operates through two segments: Automotive and Energy Generation and Storage.
TSLA’s stock has fallen 29.7% year-to-date, closing the last trading session at $174.72.
TSLA’s trailing-12-month gross profit margin of 17.78% is 51.3% lower than the industry average of 36.50%. The stock’s trailing-12-month leveraged FCF margin of negative 0.67% compares to the industry average of 5.67%.
In terms of forward non-GAAP P/E, TSLA is trading at 69.54x, 342.6% higher than the industry average of 15.71x. Also, the stock’s forward Price/Sales multiple of 5.66 is 546.4% higher than the industry average of 0.88.
TSLA deliveries plunged 20.2% from the prior quarter to 386,810 vehicles during the first quarter of fiscal year 2024. Also, TSLA continues to face lower global EV sales challenges as many carmakers prioritize hybrids over EVs.
During the first quarter that ended March 31, 2024, TSLA’s total revenues decreased 8.7% year-over-year to $21.30 billion. Its gross profit declined 18.1% from the year-ago value to $3.70 billion. The company’s adjusted EBITDA came in at $3.38 billion, a decline of 20.7% from the previous year’s quarter.
Furthermore, the company’s non-GAAP net income and EPS attributable to common stockholders came in at $1.54 billion and $0.45, down 47.6% and 47.1% from the prior year’s quarter, respectively.
Street expects TSLA’s revenue and EPS for the second quarter (ending June 2024) to decrease 2.6% and 33.8% year-over-year to $24.29 billion and $0.60, respectively. Further, the company has missed the consensus revenue and EPS estimates in three of the trailing four quarters, which is disappointing.
TSLA’s grim outlook is reflected in its POWR Ratings. The stock has an overall rating of D, translating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an F grade for Value, and a D for Stability, Growth, and Sentiment. Within the Auto & Vehicle Manufacturer industry, TSLA is ranked #42 out of 51 stocks.
Click here to access additional ratings of TSLA for Value, Quality, and Momentum.
The Case for Oshkosh Corporation
Oshkosh Corporation (OSK) offers purpose-built vehicles and equipment. It operates through Access; Defense; and Vocational segments. The company designs and manufactures aerial work platforms and telehandlers for construction, industrial, and maintenance applications and provides financing and leasing solutions.
Over the past six months, OSK’s stock has gained 36.1% and 53.2% over the past year to close the last trading session at $116.90.
On May 8, OSK entered into a definitive agreement to acquire AUSACORP S.L. (AUSA), a privately held international company and manufacturer of wheeled dumpers, rough terrain forklifts and telehandlers for the construction, material handling, agriculture, landscape and specialty equipment industries.
Mahesh Narang, Executive Vice President of OSK, said, "Combining our advanced technology capabilities and robust training, support and service infrastructures will allow us to better serve customers and enable targeted growth."
On April 25, OSK declared a quarterly cash dividend of $0.46 per share of common stock, payable on May 28, 2024. With a four-year average dividend yield of 9.51%, OSK pays an annual dividend of $1.84, which yields 1.58% on the current market price.
OSK’s trailing-12-month asset turnover ratio of 1.14x is 45.8% higher than the industry average of 0.78x. Its trailing-12-month ROTC of 13.79% is 91.5% higher than the industry average of 7.20%.
In terms of forward non-GAAP P/E, OSK is trading at 10.55x, 43.7% lower than the industry average of 18.75x. Also, the stock’s forward Price/Sales multiple of 0.72 is 51.4% lower than the industry average of 1.48.
During the fiscal first quarter that ended March 31, 2024, OSK’s net sales increased 12.2% year-over-year to $2.54 billion. Its adjusted consolidated operating income rose 81.5% from the year-ago value to $275.30 million. The company’s adjusted net income and adjusted EPS came in at $191.10 million and $2.89, up 77.6% and 77.3% year-over-year, respectively.
OSK expects adjusted EPS to be $11.25 in the current year. Analysts expect OSK’s revenue and EPS for the fiscal second quarter (ending June 2024) to increase 14.8% and 10.2% year-over-year to $2.77 billion and $2.97, respectively. Further, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
OSK’s mixed outlook is reflected in its POWR Ratings. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system.
The stock has a B grade for Value and Sentiment. Within the same industry, OSK is ranked #27.
To access OSK’s additional Growth, Quality Stability, and Momentum ratings, click here.
TSLA vs OSK: Which Auto Stock Offers Better Value?
Rapid population growth, urbanization, infrastructure development, and industrial expansion are set to boost commercial vehicle sales this year. Moreover, the potential pause in rate hikes or even cuts later this year could stimulate growth in the automotive sector. This should benefit both leading auto stocks, TSLA and OSK.
However, while TSLA trades at an expensive valuation, OSK offers attractive valuations. Moreover, OSK is backed by superior profit margins and robust financials.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturer industry here.
What To Do Next?
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OSK shares were unchanged in premarket trading Thursday. Year-to-date, OSK has gained 8.29%, versus a 9.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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