Toyota Motor Corporation TM is one of the leading automakers in the world in terms of sales and production. The company’s electrification push is a major tailwind. It aims to increase the ratio of electrified vehicles sold to total sales to 37.2% in fiscal 2024, up from 29.6% in fiscal 2023.

The Zacks Consensus Estimate for Toyota’s 2024 revenues and earnings per share is pegged at $303.7 billion and $17.22, respectively, implying a rise of 10.6% and 29.7%, respectively, from the year-ago reported number.

Let us discuss the factors that highlight why Toyota is an attractive pick.

Growth Indicators

Toyota Motor is one of the world’s leading automakers, with an array of brands, including Toyota, Lexus and Scion, which position it for solid growth. Continued demand for vehicles and a robust lineup of trucks and sport utility vehicles (“SUVs”) are set to fuel the sales volumes of Toyota. To capitalize on the accelerated global shift to environment-friendly vehicles, the auto giant is deepening its focus on manufacturing electric and fuel-cell vehicles, which will bolster the company’s product competitiveness. The ratio of electrified vehicles sold to total sales in fiscal 2023 was 29.6%. The company expects the ratio to increase to 37.2% in fiscal 2024.

Toyota’s electrification push is a massive tailwind. The Japanese auto giant aims to generate 40% of its global sales from EVs by 2025 and 70% by 2030. The company plans to invest ¥4 trillion ($35 billion) for a lineup of 30 BEVs by 2030. It aims to expand global sales of BEVs to 3.5 million units a year by 2030. The automaker’s ¥4 trillion investment for the development of other electrified vehicles, including hybrids and fuel-cell vehicles, by the end of the decade and investment in battery development of ¥2 trillion ($18 billion) will bolster its long-term prospects. By 2025, it plans to introduce fuel-cell-enabled SUVs and pick-up and commercial trucks. It is working on hydrogen fuel stations in collaboration with various partners.

Its upbeat fiscal 2024 outlook sparks optimism. For fiscal 2024, Toyota projects vehicle sales of 9.6 million units, indicating an increase from 8.82 million units sold in fiscal 2023. Its fiscal 2024 sales are expected to total ¥43 trillion, implying an increase from ¥37.15 trillion recorded in fiscal 2023. Operating income is projected to be ¥4.5 trillion, indicating a rise of 65% year over year.

Toyota’s investor-friendly moves also spark optimism. Over the past 5 years, it increased its dividend five times, with an annualized growth rate of 3.16%. In the last reported quarter, the company paid an interim dividend of ¥30 per share, a year-over-year increase of ¥5 per share. Toyota repurchased 34.3 million shares in the fiscal second quarter of 2024. For the current interim period, it has set aside ¥100 billion as the maximum amount for share repurchases.

Favorable Style Score & Zacks Rank

TM carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. TM currently carries a Zacks Rank #2 (Buy). Back-tested results have shown that stocks with a favorable Value Score, in combination with a solid Zacks Rank, are the best investment bets.

Other Key Picks

Some other top-ranked players in the auto space are Volvo VLVLY and Modine Manufacturing Company MOD, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 65.6%, respectively. The EPS estimates for 2023 and 2024 have increased by 28 cents and 13 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for MOD’s 2023 sales and earnings indicates year-over-year growth of 6.5% and 55.9%, respectively. The EPS estimates for 2023 and 2024 have increased by 16 cents and 9 cents, respectively, in the past 30 days.

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