Kia Corporation, South Korea's second-largest automaker owned by Hyundai Motor Group, reported a 23% drop in net profit to KRW 7.55 trillion (US$ 5.3 billion) in 2025, blamed largely on the impact of the US import tariffs introduced last April. Revenue rose 6.2% to a record KRW 114.1 trillion (US$ 80 billion), with global vehicle sales rising by 1.5% to 3.14 million units. Strong demand for hybrid models helped increase average selling prices. Sales of electrified vehicles, including hybrids and battery e ...

Group 1 - Costco has joined other large American companies in suing the Trump administration over import tariffs imposed this spring [1][2] - The lawsuit argues that refunds for unlawfully collected tariffs are not guaranteed without judicial relief, necessitating this separate action [2] - Costco is less exposed to tariffs compared to other retailers, with only one-third of its U.S. sales coming from imports, and less than half of those imports sourced from Canada, China, and Mexico [2]

Core Viewpoint - Skechers investors are suing company executives and 3G Capital over allegations of an unfair sale price during a recent acquisition, claiming the deal undervalued the company and favored controlling shareholders [1][2]. Group 1: Acquisition Details - 3G Capital acquired Skechers in a $9.4 billion deal that closed in September, with a share price set at $63 per share [1]. - The acquisition price was said to represent a 30% premium over the company's 15-day volume-weighted average stock price prior to the deal [5]. Group 2: Legal Actions - A class action complaint was filed in Delaware Chancery Court by hedge funds and large investors, accusing Skechers and 3G Capital of arranging a non-independent deal that shortchanged minority shareholders [2]. - Plaintiffs are seeking a higher share price and were unable to reach an early settlement with Skechers, which offered a price slightly above the original [3]. Group 3: Market Impact - Skechers' stock price fell 23% in early April following the announcement of new tariffs, but rebounded by 30% after the acquisition deal was announced [5]. - The company faced challenges due to volatile federal tariff policies affecting its production in countries like China and Vietnam [4][6]. Group 4: Executive Involvement - The complaint alleges that CEO Robert Greenberg and President Michael Greenberg collaborated closely with 3G Capital to structure the acquisition in a way that benefited them personally [6][7].

Core Insights - The Zacks Automotive Replacement Parts industry is facing challenges due to the increasing complexity of modern vehicles, which require specialized tools and expertise, leading to higher service costs and profitability pressures from U.S. import tariffs on parts sourced from China and Europe. However, the aging vehicle fleet in the U.S. is driving demand for maintenance and replacement components, benefiting companies like LKQ Corporation, Dorman Products, and Standard Motor Products [1][5]. Industry Overview - The industry includes companies that produce, market, and distribute replacement components for the automotive aftermarket, offering essential parts such as engine, steering, and brake components. The market is less sensitive to economic downturns as consumers prioritize vehicle maintenance over new purchases [2]. Factors Shaping Industry Prospects - Rising vehicle complexity is straining the aftermarket, requiring specialized skills and tools, which can lead to longer service times and increased costs for suppliers [3]. - Manufacturers face cost pressures due to high U.S. import tariffs, with many producing only about half of their parts domestically, leading to potential price increases for consumers [4]. - The average vehicle age in the U.S. has risen to 12.8 years in 2025, up from 12.6 years in 2024, sustaining strong demand for replacement parts as owners delay new purchases [5]. Industry Performance - The Zacks Automotive Replacement Parts industry ranks 183, placing it in the bottom 24% of around 250 Zacks industries, indicating weak near-term prospects with a significant decline in earnings estimates for 2026 and 2027 [6][7]. Market Performance - The industry has underperformed compared to the Auto, Tires, and Truck sector and the S&P 500, declining 17.6% over the past year, while the sector grew by 14.1% and the S&P 500 returned 14.2% [9]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 7.47X, significantly lower than the S&P 500's 18.06X and the sector's 22.93X, indicating a potential undervaluation compared to historical highs of 12.15X and lows of 6.02X over the past five years [12]. Company Highlights - **Standard Motor Products (SMP)**: A leading manufacturer of automotive replacement parts, recently expanded through the acquisition of Nissens, expecting $8-$12 million in annualized cost savings. SMP has surpassed earnings estimates consistently, with a projected 20.9% growth in sales for 2025 [14][15]. - **LKQ Corporation**: A major provider of replacement parts, has strengthened its growth outlook through strategic acquisitions, including Uni-Select. The company has cut $125 million in costs and plans to reduce another $75 million [21][22]. - **Dorman Products**: A supplier of exclusive replacement parts, recently launched a revamped e-commerce platform to enhance customer experience and operational scalability. Dorman has also consistently surpassed earnings estimates, with a projected 8% growth in sales for 2025 [24][25].

Core Insights - Mazda Motor Corporation reported a 6% decline in global revenues to JPY2,238.5 billion in the first half of FY26, attributing the decline to US import tariffs implemented in April [1][4] - The company incurred an operating loss of JPY53.9 billion, a significant drop from an operating profit of JPY103 billion in the same period last year [1][4] - Mazda expects a full-year revenue decline of 2% to JPY4,900 billion, with vehicle sales projected to decrease slightly to 1.3 million units [4] Financial Performance - In the second quarter of FY26, Mazda reported a net loss of JPY7.8 billion, which could have been a break-even result without the impact of US tariffs [2] - The net loss for the first half of FY26 totaled JPY45.3 billion, contrasting with a net profit of JPY35.3 billion in the previous year [2] Production and Sales - Global vehicle production decreased by 8% to 555,000 units in the April-September period, down from 603,000 units a year earlier [3] - Global vehicle sales fell by 3% to 609,000 units, with US sales down by 2% to 209,000 units and European sales plummeting by 17% to 74,000 units; however, sales in Japan increased by 6% to 68,000 units [3]

Core Insights - Honda Motor experienced a 25% decline in second-quarter operating profit compared to the previous year, primarily due to the impact of U.S. import tariffs and a slowdown in demand for electric vehicles [1] Financial Performance - The operating profit for Honda Motor in the second quarter fell significantly by 25% year-over-year [1] Market Conditions - The decline in performance is attributed to external factors such as U.S. import tariffs affecting costs and a decrease in consumer demand for electric vehicles [1]

Core Insights - Hyundai Motor Company reported a 20.5% decline in net profits to KRW 2.548 trillion (US$1.8 billion) in Q3 2025, down from KRW 3.2 trillion in the same period last year, primarily due to the impact of US import tariffs [1][4] - The company's operating profit decreased by 29.1% to KRW 2.537 trillion [1] Tariff Impact - The US government imposed a 25% tariff on South Korean imports in April, which Hyundai could not fully pass on to customers, but the tariff was recently negotiated down to 15% [2] - The reduction in tariffs is expected to enable Hyundai to compete more effectively with other global automakers in the US market [2] Sales and Deliveries - Hyundai experienced a 2.6% year-on-year increase in global vehicle deliveries, totaling 1.038 million units in the quarter [3] - Revenues increased by 8.8% to KRW 46,721 billion, supported by an improved product mix and favorable currency exchange rates [3] - SUV sales rose by nearly 9% to 659,000 units, while sales of electrified vehicles increased by 25% to 252,000 units [3] Regional Performance - Domestic wholesale deliveries increased by 6.3% year-on-year to 181,000 units in Q3 [4] - US sales rose by 2.4% to 257,000 units, and European sales increased by 7.9% to 150,000 units [4]

Sales Performance - Dollar Tree's sales growth decelerated after price increases [1] External Factors - US import tariffs imposed by President Trump led to Dollar Tree raising prices [1]

Core Viewpoint - Small-cap stocks are showing positive momentum, with the Russell 2000 Index returning over 10% in the 90 days ending October 9, aided by the Federal Reserve's September rate cut [1]. Group 1: Small-Cap Stock Performance - The recent performance of small-cap stocks marks a significant improvement for a sector that has historically disappointed investors [2]. - Investors are advised to be selective when investing in small-cap stocks, with the O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) being a recommended option [2]. Group 2: Investment Opportunities - Domestic small-caps offer a way to access earnings growth without heavily increasing exposure to the technology sector, as OUSM allocates only 14.40% of its portfolio to tech stocks [3]. - Smaller companies are less vulnerable to trade tariffs compared to larger U.S. and European firms, which is a crucial consideration given the ongoing trade levies [4]. Group 3: Economic Context - U.S. small-cap stocks are expected to benefit from the historical trend of outperforming large-caps during periods of Federal Reserve easing, alongside solid U.S. GDP growth [5]. - The concentration of small-cap companies on domestic sales positions them favorably amidst robust consumer demand in the U.S. market [6].

Group 1 - At least a third of surveyed companies have paused or delayed stainless steel orders due to U.S. import tariffs of up to 50% [1] - More than half of the surveyed companies are reassessing their sourcing strategy in response to the tariffs [1]