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Since the beginning of the worldwide recession in 2007, new car and truck sales have slowed. Companies that supplied parts to the new car makers were also casualties of the recession and suffered through significant earnings reductions. In 2011, the economy began to improve and new car sales began to increase. This article will examine five auto parts makers to see if any of them could be set for a breakout.

Borg Warner (NYSE:BWA) Borg Warner has a market cap of $7.06 billion with a price to earnings ratio of 14.88. The stock has traded in a 52 week range between $54.59 and $77.70. The stock is currently trading around $64. The company reported third quarter revenues of $1.8 billion compared to revenues of $1.4 billion in the third quarter of 2010. Third quarter net income was $141 million compared to net income of $106 million in the third quarter of 2010.

One of Borg Warner’s competitors is Genuine Parts Company (NYSE:GPC). Genuine Parts is currently trading around $62 with a market cap of $9.66 billion and a price to earnings ratio of 17.88. Genuine Parts does not pay a dividend versus Borg Warner whose dividend yields 2.9%.

Borg Warner manufactures automotive components, which it sales primarily to new car manufacturers. The company’s earnings have been in an uptrend. In 2010, the company increased year-over-year revenues by 43% and net income by 1,296%. In the third quarter, the company increased year-over-year revenues by 28% and net income by 32%. Despite the company’s impressive earnings growth, the stock price is down by 6% over the last 52 weeks and down by 13% over the last two months. Unfortunately for Borg Warner it is in an out of favor market sector (Auto Parts). I believe that investors are not sure if there will be enough demand for new car parts in the future. Borg Warner’s chairman and CEO Tim Manganello addressed those concerns by saying

BorgWarner’s performance is linked to the industry’s focus on fuel economy and improved emissions. There may be uncertainty about European vehicle production, but there is no doubt that fuel economy and improved emissions are a focal point for the industry now and for many years to come. Therefore, we remain bullish about BorgWarner’s near term and our long-term future.

If Mr. Manganello is correct, and the company continues to grow earnings, Borg Warner should prosper going forward.

Magna International Inc. (NYSE:MGA) Magna International has a market cap of $8.57 billion with a price to earnings ratio of 9.89. The stock has traded in a 52 week range between $30.03 and $62.20. The stock is currently trading around $36. The company reported third quarter revenues of $ 6.9 billion compared to revenues of $5.7 billion in the third quarter of 2010. Third quarter net income was $102 million compared to net income of $266 million in the third quarter of 2010.

One of Magna International’s competitors is Delphi Automotive Plc. (NYSE:DLPH). Delphi is currently trading around $23 with a market cap of $8.4 billion and a negative price to earnings ratio. Delphi does not pay a dividend versus Magna International whose dividend yields 2.9%.

Magna International is a Canadian Company that designs and manufactures automotive systems for original automobile equipment manufacturers. In the third quarter, the company increased year-over-year revenues by 21% but saw its net income decrease by 160%. The majority of the earnings decrease was the result of what was classified as a $124 million unusual expense. The company lost $453 million in 2009 but increased its net income to $1 billion in 2010. The company has reported net income of $706 million through the first three quarters of 2011.

The stock of the company fell after the Japanese tsunami based on fears that new car production would fall. However, automobile production recovered quicker than expected, and in 2011 new car production in North America was 9.2% higher than last year. This allowed Magna International to beat third quarter revenue expectations by $200 million. Unfortunately, higher cost caused the company to miss earnings per share projections of $0.99 per share by $0.05. The stock has been hit hard and is down by 42% over the last 52 weeks. Magna International is one of the largest auto parts manufacturers in the world and its parts are used by almost every major car manufacturer.

The company has been profitable in nine out of the last ten years, and the stock is now dirt cheap with a price to earnings ratio of 9.31, and a price to book ratio of 0.98%. The stock pays a dividend with a 2.9% yield and might be a bargain by investors with a long term investment strategy.

Dana Holding Corporation (DAN) Dana Holding has a market cap of $1.93 billion with a price to earnings ratio of 20.63. The stock has traded in a 52 week range between $9.45 and $19.35. The stock is currently trading around $13. The company reported third quarter revenues of $1.9 billion compared to revenues of $1.5 billion in the third quarter of 2010. Third quarter net income was $110 million compared to net income of $46 million in the third quarter of 2010.

One of Dana Holding’s competitors is Meritor Inc. (NYSE:MTOR). Meritor is currently trading around $6 with a market cap of $576 million and a price to earnings ratio of 9.38. Neither Meritor or Dana Holding pays a dividend.

Dana Holding designs and manufactures products for vehicle manufacturers. In the third quarter, the company increased year-over-year revenues by 26% and net income by 139%. The company’s net was up by 62% from the last quarter. One of Wall Street’s most successful investors, David Tepper is confident about Dana Holding’s future. In the third quarter Mr. Tepper purchased 46,173 shares of Dana Holding. The stock price of Dana Holding is down by 28% over the last 52 weeks, but in the last month the stock price is up by 7.3%. In the third quarter, the company reported strong earnings because of an increase in the sales of cars and light duty trucks. The US economy is getting stronger which could further increase the sales of new car and trucks. I think that Mr. Tepper is correct, and that Dana Holding’s stock price will move up.

Gentex Corporation (NASDAQ:GNTX) Gentex has a market cap of $4.29 billion with a price to earnings ratio of 26.71. The stock has traded in a 52 week range between $21.84 and $35.35. The stock is currently trading around $30. The company reported third quarter revenues of $269 million compared to revenues of $207 million in the third quarter of 2010. Third quarter net income was $43 million compared to net income of $34 million in the third quarter of 2010.

One of Gentex’s competitors is American Axle & Manufacturing (NYSE:AXL). American Axle is currently trading around $11 with a market cap of $854 million and a price to earnings ratio of 5.82. American Axle does not pay a dividend versus Gentex whose dividend yields 1.6%.

Gentex designs and manufactures electro-optical products that are used in auto-dimming mirrors with electronic features. The company’s products are also used in commercial buildings. In the third quarter, the company increased year-over -year revenues by 30% and net income by 27%. The company’s earnings have been trending up. Through the first three quarters of 2011, the company reported net income of $124 million and is on track to easily surpass 2010 net income of $137 million. On October 20th, the company reported third quarter earnings that beat expectations. And since then the stock price has increased by 10%. Despite the fact that the company has been increasing its earnings investors are worried because "the company experienced increased costs associated with supply chain constraints on certain automotive grade electronic components.” Gentex’s management has worked to insure that the company will have adequate supplies, and if new car sales continue to grow the company should be able to increase earnings.

Visteon Corporation (NYSE:VC) Visteon has a market cap of $2.68 billion with a price to earnings ratio of 2.21. The stock has traded in a 52 week range between $38.32 and $76.61. The stock is currently trading around $52. In the third quarter, the company reported revenues of $2 billion compared to revenues of $1.7 billion in the third quarter of 2010. Third quarter net income was $41 million compared to net income of $-$140 million in the third quarter of 2010.

One of Visteon’s competitors is Denso Corporation (OTCPK:DNZOY). Denso is currently trading around $14 with a market cap of $22.07 billion and a price to earnings ratio of 23.38 Neither Denso or Visteon pay a dividend.

Visteon supplies modules and components to new car manufacturers such as Chrysler (OTCPK:DDAIF), Ford (NYSE:F), a buy due to credit rating improvements and General Motors (NYSE:GM), also a buy on growth. In the third quarter, the company’s year-over-year revenues increased by $300 million and its net income increased by $181 million. The increased earnings were largely driven by higher production volumes and favorable currency. The company’s stock has performed poorly and is down by 30% over the last 52 weeks and 7% over the last month. One of the reasons for the stocks poor performance is the company’s margins (gross margin 7.96%/operating margin 2.99%) which are well below the industry averages. The good news is “In October 2010, the Company announced that it has completed its reorganization and emerged from the United States Chapter 11 process.” In the third quarter Visteon’s earnings showed marked improvement, which might make the stock look interesting to investors that like to bottom fish.

Prospective investors should do further research.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 5 Autoparts Makers Ready For A Breakout