Retail groups lead 3rd-qtr. shareholder value gains
Shareholder value rose slightly for global automakers and suppliers in the third quarter but soared for U.S. vehicle retail groups as consumer demand for light vehicles in the United States continued to climb.
In September, the seasonally adjusted annualized rate of U.S. sales reached 14.9 million -- the highest rate since March 2008.
During the quarter, shareholder value for publicly owned global suppliers rose 4 percent, according to the Automotive News/PwC Shareholder Value Index. Global automakers experienced a 2 percent gain in the quarter.
Both groups of auto-related stocks were outperformed by the S&P 500 index, which rose 6 percent during the quarter, and the Dow Jones Industrial Average, which rose 4 percent. But shareholder value for publicly owned U.S. automotive retail groups surged 31 percent, well ahead of the major market indexes.
In the latest quarter, all six retailers posted positive returns. Lithia Motors Inc. led the group with a 45 percent gain followed by Penske Automotive Group Inc. with 42 percent; Sonic Automotive Inc., 39 percent; Group 1 Automotive Inc., 32 percent; AutoNation Inc., 24 percent; and Asbury Automotive Group, 18 percent.
Over the past year, retailers posted a positive return of 59 percent, with Lithia's 135 percent gain the largest.
Over the past three years, retailers had a return of 108 percent led by AutoNation's 142 percent rise.
Improved consumer financing opportunities and low interest rates helped U.S. retailers, said Jeff Zaleski, PwC's automotive partner. He said the rest of the year looks positive for retailers, barring an unexpected shock to the economy. Zaleski said the age of vehicles on the road will not decline anytime soon, so replacement demand will remain strong.
"Retailers generally do well in the low interest [rate] environment," Zaleski said. "There are a lot of people who have been putting off purchases." As those people enter the showroom at a time when interest rates are low, "it's beneficial," he said. "This is a good time for people to buy new cars."
Uncertainty for automakers
In the latest quarter, "a steady stream of disappointing news from Europe and Japan" plus "relatively weak performance in traditional growth markets" such as China, Brazil and India depressed the industry's outlook and hurt global automakers' shareholder returns, PwC said in a report.
Zaleski said: "We'll continue to see improvement in North America, albeit slow. Europe is going to continue to be a struggle throughout the remainder of the year. The emerging markets, specifically China and Brazil, have been weaker than I expected them to be so far this year."
In general, third-quarter returns fell for Asian automakers in the index with Hyundai Motor Co.'s 11 percent gain the only exception. European companies' positive returns were pulled down by a 19 percent drop at PSA Peugeot Citroen. Both North American companies posted positive returns: General Motors' returns rose 15 percent, and Ford Motor Co.'s rose 3 percent.
One-year performance returns for automakers rose 11 percent, and three-year returns rose 26 percent.
"Uncertainty as to when market volatility will stabilize remains top of mind among the global automotive community," the report said.
In the third quarter, fewer than half of the global suppliers posted positive shareholder returns. Asian suppliers' returns fell 12 percent on average while North American suppliers' returns rose 4 percent and European suppliers' returns climbed 13 percent.
GKN Automotive had the strongest quarter with a 23 percent return while both Michelin Group and Delphi Automotive rose 20 percent.
Global suppliers' returns averaged 7 percent for the past year and 39 percent for the past three years. PwC attributed the growth to "the realization of share appreciation from historical lows in 2009."
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