Tata Motors: Zacks’ Bull of the Day Play

Excellent quarterly results, thanks mainly to strong sales by its Jaguar Land Rover unit have sent estimates for Tata Motors higher and the stock back to Zacks Rank # 1 (Strong Buy).

About the Company

Tata Motors Limited (TTM – Snapshot Report) is India’s largest automobile company, and a leader in commercial vehicles in each segment, and among the top in passenger vehicles. It is also the world’s fifth largest truck manufacturer and fourth largest bus manufacturer.

The company also has operations in the UK, South Korea, Thailand, South Africa and Indonesia. It acquired Jaguar Land Rover in 2008 from Ford to get a global presence in the luxury vehicle market.

Tata Motors’ ADR is listed on the New York Stock Exchange since September 2004.

Excellent Quarterly Results

Tata Motors reported the results for its fiscal first quarter ended June 30 on August 11. Consolidated revenues rose 38.2% over the same quarter in the previous year, thanks mainly to strong demand for new products and growth in volumes at Jaguar Land Rover. On the other hand, the domestic segment continued to report a poor performance with declining sales for cars, SUVs, trucks and buses due to weak macroeconomic conditions.

Rising Estimates

After excellent results, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and next fiscal year are now $4.54 and $4.99 per share up from $4.32 and $4.54 per share respectively, 30 days ago.

New Model Launched

On August 12, Tata Motors announced the launch of Tata Zest—its first new car model in four years. The car is targeted at India’s fast growing middle class with rising incomes. India is expected to become the third largest auto market in the world after China and the US. Per Moody’s profitability of the company depends on its ability to sell significant volumes of its new Zest and Bolt models.

While the latest launch came a long time after the debut of Nano—dubbed as the world’s cheapest car, the company now plans to introduce two new models every year. Declining sales of Nano could have been one of the reasons for delay in launch of a new model. The company plans to launch another model—Bolt—later this year.

Improving Car Sales in India

Passenger car sales in India increased 6.5% in July, rising for the second consecutive month after a long period of deckling sales. With the economy showing signs of a pick-up and strong consumer sentiment after the election of the new government, the momentum is likely to continue in the coming months. According to the Society of Indian Automobile Manufacturers, India’s car sales are expected to grow between 5% and 10% this fiscal year.

The Bottom Line

With continued focus on investment in new products and new technologies and expansion in international markets, Tata Motors’ growth outlook remains strong, despite some headwinds in the domestic markets.

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