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Bull of the Day: Motorcar Parts of America

Motorcar Parts (NASDAQ: MPAA), reported their sixth consecutive positive earnings surprise in mid-November.  The main driver behind the earnings growth was new business wins for their wheel hub and brake master cylinder business.  

This Zacks Rank #1 (Strong Buy) company is a leading manufacturer of replacement alternators and starters for imported and domestic cars and light trucks in the United States and Canada.  The company’s full line of alternators and starters are remanufactured for vehicles imported from Japan, Germany, Sweden, France, and Korea.  

Increasing Estimates

Motorcar Parts also saw growth in several other key areas during the quarter.  First, net sales increased 7.1% YoY, Adjusted net income almost doubled from last year, and Adjusted gross profit saw a 37.5% increase.  According to CEO Selwyn Joffe, they have seen “strong interest in our new product introductions and solid growth in rotating electrical.  An aging vehicle population, lower fuel costs, and positive operating synergies support our growth potential.”  And we agree.

These strong numbers caused the Zacks Consensus Estimates to rise over the past 30 days for Q3 15, Q4 15, FY 15, and FY 16.  For Q3 15 estimates have risen from $0.32 to $0.35, Q4 15 increased from $0.49 to $0.54, FY 15 rose from $1.46 to $1.80, and FY 16 from $1.83 to $2.16.  

If you look at the Price and Consensus graph below, you will see that Motorcar Parts is projected to see significant growth over the next 1-3 months.  

Positive Earnings Surprises

Q2 2015 was the sixth consecutive positive earnings surprise by this company, and not only did they beat expectations they crushed them.  Over the past four quarters Motorcar Parts has posted an average positive earnings surprise of 35.24%.  

Further Company Data

Motorcar Parts of America’s new Brake Master Cylinder sales generated $2.7 million while only coming online in late July of this year.  Further, organic growth of Rotating Electrical was 9.8% YoY, while organic growth and Wheel Hub sales grew 69.8% YoY.  This indicates strong demand for Motorcar Parts new products and existing parts as well.  

Bottom Line

Motorcar Parts of America’s new business wins, strong organic growth, and increasing demand for their products make them the Zacks Bull of the Day.  We believe that MPAA will see significant growth over the next 1-3 months, and potentially longer. 

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