3 Original Auto Equipment Stocks to Watch as Industry Dynamics Evolve

Industry Overview - The Zacks Automotive - Original Equipment industry is expected to benefit from acquisitions, collaborations, a diverse customer base, and the global expansion of original equipment manufacturers [1][2] - The industry focuses on designing and producing passive safety systems, driveline, and metal forming technologies for various vehicle types, including electric and hybrid vehicles [2] Factors Influencing the Industry Outlook - Automation technology is enhancing efficiency, productivity, quality, and safety while reducing labor costs for manufacturers, providing a competitive edge [3] - A new tax incentive allows car buyers to deduct up to $10,000 annually in auto loan interest from their federal taxable income, which is anticipated to increase demand for new vehicles [4] Demand and Production Trends - A decline in vehicle production due to weak demand, particularly for unsold electric vehicles, is expected to negatively impact the demand for auto equipment [5] - The U.S. government has implemented a 25% import tax on essential auto components, raising costs for domestic equipment manufacturers [6] Industry Performance and Valuation - The Zacks Automotive - Original Equipment Industry ranks 91, placing it in the top 37% of over 250 Zacks industries, indicating positive near-term prospects [7][8] - The industry has underperformed the S&P 500, declining 3% over the past year compared to the S&P 500's growth of 16.6% [10] - The industry is currently trading at an EV/EBITDA ratio of 18.57X, higher than the S&P 500's 17.77X and lower than the sector's 22.63X [13] Company Highlights - Gentex Corporation (GNTX): Supplies automatic-dimming mirrors and electronics, with growth potential in tech products and a recent acquisition of VOXX International expanding its portfolio [16][17] - Adient plc (ADNT): A leading automotive seating supplier focusing on automation and modularity, with a diverse customer base and international presence [22][23] - American Axle & Manufacturing Holdings, Inc. (AXL): A supplier of driveline systems advancing in electrification, with a strong market position bolstered by recent acquisitions [26][27]