Six Auto Stocks That Could Accelerate

NEW YORK ( TheStreet) -- Ford Motor Co. ( F) and General Motors ( GM) are among six automotive industry stocks that could log solid gains in the next year, according to price targets from Wall Street analysts.

Auto sales surged nearly 10% to 13.1 million vehicles in September from 11.8 million in the same period a year earlier, according to Autodata Corp.

Sales were boosted by higher discounts and robust demand for pickup trucks and sport-utility vehicles.

Light vehicle sales for September rose 9.9% to 1.05 million.

GM, Chrysler Group LLC, and Nissan Motor ( NSANY) reported 20% hikes in September auto sales from a year ago. Similarly, Ford saw sales improve by 9%.

The six stocks we have selected could see significant gains in the next 12 months, according to analysts' price targets.

6. Lear Corporation ( LEA) engages in the manufacture of automotive seating systems and electrical power management systems.

Pretax income for the second quarter of 2011 rose to $205.4 million from $182.6 million. Adjusted earnings per share were $1.65 compared with $1.47 in the same quarter last year.

For the quarter, Lear reported net sales of $3.7 billion, vs. $3 billion in the year-ago period, representing growth of 23%. In the seating segment, net sales increased 19% to $2.9 billion, while electrical power management systems observed 29% sales growth to $816.4 million.

During the quarter, free cash flow was $121.0 million and net cash from operating activities was $206.7 million. The balance sheet is strong, with $1.8 billion cash. Capital spending in 2011 is estimated at $325 million, reflecting further investment plans in emerging markets.

Lear expects 2011 net sales to range from $13.4 billion to $13.8 billion and operating earnings to range between $740 million and $780 million. On average, analysts expect the stock to gain 48% over the next year. Eight-one percent of analysts covering the stock give it a buy rating.

5. Ford Motor Company is a manufacturer of cars and trucks.

During the second quarter of 2011, Ford reduced automotive debt by $2.6 billion by making payments on its term loans and full repayment on its revolving credit line. The company's automotive gross cash exceeded debt by $8 billion in the first half of 2011, an improvement of $6.6 billion compared to second half of 2010. At the end of June quarter, the company had automotive gross cash of $22 billion.

Ford reported revenue of $35.5 billion for the second quarter of 2011, a $4.2 billion increase from the same quarter in 2010. Operating profit was $2.3 billion, vs. $209 million in the second quarter of 2010. The company earned net income of $2.4 billion during the June quarter.

Ford expects third-quarter production at 1.4 million units, up 92,000 units from the year-ago quarter. On average, analysts surveyed by Bloomberg expect the stock to gain 74% over the next year. Seventy-one percent of analysts covering the company rate its shares a buy.

4. General Motors is one of the world's largest automakers, with business interests in more than 120 countries.

The company reported its sixth straight quarter of profitability in the second quarter of 2011 -- net income increased 89% to $2.5 billion from $1.3 billion in the same quarter of the previous year.

GM generated revenue of $39.4 billion for the quarter, a $6.2 billion increase from the same quarter of the previous year. The company earned $3 billion before interest and taxes, up from $2 billion in the corresponding quarter of 2010.

"Our progress has been steady and we're preparing to launch more new products this year, including the Chevrolet Sonic in North America, the Opel/Vauxhall Zafira in Europe and the Baojun 630 in China to keep the momentum going," said Dan Akerson, GM's CEO.

On average, analysts surveyed by Bloomberg expect the stock to gain 80% over the next year. Seventy-six percent of them rate the stock a buy.

3. Tenneco ( TEN) manufacturers emission-control and ride-control products and systems for the automotive original equipment market.

Net income for the second quarter of 2011 was reported at $50 million, up 25% from the same quarter in the previous year. Original equipment volumes and increased volumes from the higher-margin light and commercial vehicle business improved adjusted EBIT (earnings before interest and taxes) to $115 million from $97 million a year ago.

Earnings before interest, taxes, depreciation and amortization (or EBITDA) for the quarter was $167 million, rising 14% from $146 million a year ago. The company's leverage ratio -- its ratio of net debt to adjusted EBITDA -- was 2, down from 2.3 as of June 2010.

During the quarter, capital expenditures increased to $47 million from $30 million in the previous-year period owing to investments in new manufacturing facilities in China and the start of commercial vehicle emission control business in Europe and South America. Full-year capital expenditures are estimated between $190 million and $210 million.

Tenneco is expected to launch diesel after-treatment programs with 13 commercial vehicle and engine manufacturers globally. On average, analysts polled by Bloomberg project 83% upside over the next year. Sixty-seven percent of analysts covering the company rate it a buy. The stock is trading at a price-to-earnings ratio of 9.4, based on 2011 earnings estimates.

2. The Goodyear Tire & Rubber Company ( GT) manufactures and sells tires and related products and services to customers worldwide.

Strong price-mix improvements drove revenue per tire up 18% during the second quarter of 2011. Revenue increased 24% to $5.6 billion year over year. Tire unit volumes totaled 42.9 million, down 2%.

Net income for the quarter was $40 million, vs. $28 million in the corresponding quarter of 2010. For the quarter, the company's operating income stood at $382 million, up $163 million from the same quarter a year before. The company's operating income reflected improved price realization, offset to some extent by higher raw material costs.

Goodyear expects raw material costs to increase more than 30% for the remainder of 2011. In light of the reduced outlook for the U.S. consumer replacement industry and second-quarter volumes, the company expects unit volumes to increase around 3% to 5% for the year. Among analysts covering the stock, 55% rate it a buy, according to Bloomberg. On average, they expect the stock to rise 85% over the next year.

1. TRW Automotive Holdings ( TRW) is a leading automotive supplier.

Net income for the second quarter of 2011 increased to $293 million, vs. $227 million delivered during the same period in 2010. Operating income was $368 million, vs. $322 million in the year-earlier quarter. Operating income includes a favorable resolution of a commercial matter amounting to $19 million, although it was offset by higher raw material costs.

The company's revenue was $4.2 billion, up 16% from the prior year period, driven by improved vehicle production volumes, increased demand for TRW's safety products and the positive currency impact.

The company expects full-year production of 13 million units in North America and 20 million units in Europe. Full-year sales are estimated to range from $16.2 billion to $16.4 billion. Analysts surveyed by Bloomberg expect the stock to rise an average of 109% over the next year. Eight-two percent of them rate the shares a buy.

>>To see these stocks in action, visit the 6 Auto Stocks That Could Accelerate portfolio on Stockpickr.

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