3 Sure Ways to Profit From the Auto Sector's Huge Resurgence

These three stocks will accelerate on the continuing growth in auto sales. The most recent quarterly results for the auto sector are posted, and the numbers are phenomenal.
By Chiradeep BasuMallick ,

The automobile sector is enjoying nitro-charged prospects, with surging auto and truck sales propelling analysts' expectations for a stellar fourth quarter. And the good times are expected to extend into 2016.

U.S. auto sales are set to end 2015 topping the 2000 record of 17.35 million vehicles sold. After adjusting for seasonal variations, sales for the last month were at a 18.24 million annual rate, the highest October sales figures since 2001.

Will 2016 be another big year for the industry? It appears so. Here's a sneak preview, pinpointing the best opportunities for you to make money now.

GM data by YCharts

1. General Motors (GM) - Get Report

The maker of the Chevrolet, Buick, GMC and Cadillac brands sold 262,993 vehicles in the U.S. in October. Chevrolet posted its best October sales since 2004. The company's sales to individual customers climbed about 16% compared with a year ago, better than the rest of the industry.

The high margin SUV/crossovers were also a part of the success story. However, average transaction prices were down.

After beating analysts' EPS estimates by 31 cents with earnings per share of $1.50 in its third quarter, General Motors is expected to deliver EPS of $1.18 for the fourth quarter. That's down slightly from the fourth quarter of 2014, when EPS was $1.19.

General Motors is estimated to show a 2.2% year-over-year decline in fourth-quarter sales at $38.75 billion, but at a forward price-to-earnings ratio of 6.5, General Motors is now ultracheap, especially because analysts estimate EPS will growth 57% for all of 2015 and 12.5% in 2016. Meanwhile, the forward annual dividend yield of 4% is good news for dividend lovers.

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2. Ford Motor (F) - Get Report

Ford Motor posted its best October sales since 2004. The ever-popular F-Series pickup trucks continued a strong rebound after their ramp-down earlier this year.

Retail SUV and truck sales were up 15% during the month. Overall sales grew by 13.4% to 213,938 units in October.

Ford reported a sharp increase in quarterly profits towards the end of October, aided by its record-beating performance in North America.

Did Ford meet market expectations? Out of the last three quarters, Ford has been able to beat EPS estimates just once. In the fourth quarter, Ford is expected to deliver 47 cents per share in earnings, a sharp rise from 26 cents a year ago in the same quarter. Additionally, analysts on average expect 7.5% year-over-year growth in revenue, boosted by the holiday season, to $36.33 billion.

If Ford manages to deliver the above, it could wrap 2015 with a 2.5% uptick in top line and a healthy 40% rise in EPS. Fiscal 2016 should see a 4.6% increase in sales, according to analysts' estimates.

Like General Motors, Ford is also a reliable income generator, and a looming dividend hike could sweeten the deal for investors. In fact, a hike is quite probable, given that boosting the annual payout by 10% to 66 cents wouldn't adversely impact Ford's payout capacity.

FCAU data by YCharts

3. Fiat Chrysler Automobiles (FCAU) - Get Report

Fiat Chrysler Automobiles is also part of this massive growth saga, posting double-digit sales growth for the month of October.

Unit sales grew 14.7% to 195,545, topping estimates for a 14% uptick. However, car sales fell 3% to 38,137 units. On the flip side, sales for its trucks category increased by 20%.

With a forward P/E of more than 10, the company has a richer valuation than General Motors and Ford. It could maintain the edge, if it can deliver expected EPS growth of 81% in 2016.

2015 has been a little sedate for Fiat with the company expected to close the year with a 5.5% EPS rise. For the fourth quarter, EPS is expected to come in at 33 cents a share, a sharp sequential rise from the third quarter's 20 cents.

A number of factors remain up in the air for Fiat: the Ferrari spinoff, a costs-driven labor agreement with the United Automobile Workers union and the fate of its Europe, Middle East and Africa business. Regardless, this storied carmaker is a great growth stock on an upward trajectory, especially as the holiday shopping season gets underway.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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