Improving U.S. Car Sales Will Drive These Manufacturing Stocks Forward In 2012

 |  Includes: LEA, WBC
by: Bret Jensen

U.S. car sales improved significantly in 2011. I would look for similar gains in 2012 provided Europe does not bring down the global economy. Here are two dirt cheap, cash rich equities with solid growth prospects that look good at these levels.

Lear Corporation (NYSE:LEA) - "Lear Corporation designs, manufactures, assembles, and supplies automotive seat systems, electrical distribution systems, and related components. The company operates in two segments, Seating and Electrical Power Management Systems (EPMS)". (Business description from Yahoo Finance)

4 reasons LEA is a great value at $42 a share:

  • It has over $10 a share in net cash on the balance sheet, yields 1.2% and just upped its stock buyback program by $300mm
  • Lear has crushed earnings expectations three of the last four quarters and has a five-year projected PEG of just .47.
  • The median analysts' price target on Lear is $60. Credit Suisse has a $71 price target and an "outperform" rating on LEA.
  • Lear sells for less than eight times forward earnings and 31% of revenue.

WABCO Holdings (NYSE:WBC) - "WABCO Holdings Inc. develops, manufactures, and sells braking, stability, suspension, and transmission control systems primarily for commercial vehicles. It offers pneumatic anti-lock braking systems, electronic braking systems, automated manual transmission systems, air disk brakes, and various conventional mechanical products, such as actuators, air compressors, and air control valves for heavy- and medium-sized trucks, trailers, and buses". (Business description from Yahoo Finance)

4 reasons WBC is a buy at $48 a share:

  • Credit Suisse has an "outperform" rating and a price target of $66 on WBC. $66 a share is also the median analysts' price target on WABCO Holdings.
  • It has a solid balance sheet with net cash on the books. WBC sells at 10 times operating cash flow.
  • The company has easily beat earnings estimates each of the last four quarters and net income improved roughly 80% from FY2010 to FY2011.
  • The stock has a five-year projected PEG of just .66 and goes for 10 times forward earnings.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in WBC over the next 72 hours.