Transportation plays General Motors (GM), Magna International (MGA), Textainer Group Holdings (TGH), TransDigm Group (TDG) and Airbus (EADSY) are top stocks to watch this week.
GM and Magna are actionable after breaking out from a trend line, while TDG and Airbus are in buy range from bases. TGH stock broke out Friday, running just beyond the 5% chase zone. However, with the market rally still under pressure, it's wise to be cautious about starting positions in any stock.
Also, Magna was Thursday's Stock Of The Day, while Textainer was Friday's Stock Of The Day. And TransDigm is an IBD Leaderboard stock.
GM stock is in buy range after breaking a trend line on Thursday. That came on news that General Motors is reopening some of its plants shuttered due to chip shortages. GM said four North American plants are scheduled to reopen as chip shortages begin to ease. Two of the plants are in Mexico, one is in Lansing, Mich., and another is in Ontario, Canada.
MarketSmith chart analysis shows GM stock is in a cup base with an official buy point of 63.54. Its relative strength line has pulled back modestly, but it's still near recent highs. The relative strength line, the blue line of the chart, measures a stock's performance vs. the S&P 500 index
Its RS Rating is 88 out of a possible 99, which means GM stock has outperformed 88% of all stocks in the last 12 months.
GM's EPS Rating is 75, as it's posted three straight quarters of earnings growth. The company more than doubled analyst estimates in Q1, posting EPS of $2.25. Year-ago comps were just 62 cents a share, as the pandemic shuttered production and dealerships.
GM plans to invest heavily in its transformation to EV maker. It will invest $7 billion in electric- and self-driving vehicles this year and $27 billion by 2025. GM plans to launch 30 EV models globally in that period.
Key GM supplier Magna's stock is in buy range after clearing a 99.82 buy point Thursday from a short consolidation that was a couple days shy of being a flat base. MGA stock was actionable earlier Thursday from its bounce off the 10-week line and breaking a short trend line.
Magna's relative strength line is trending upward, hitting new highs. Its RS Rating is 91, while its EPS Rating is 74.
The Ontario, Canada-based company has posted three quarters of accelerating earnings growth. Meanwhile, revenue growth has resumed the last two quarters, after declining for several quarters.
Magna supplies GM with parts such as mirrors, truck frames and seat systems. It also makes entire vehicles for BMW and Jaguar. It recently inked a deal with Fisker (FSR) to make its Ocean SUV. Magna has also been rumored to be collaborating with Apple (AAPL) to build a car.
Record-high container prices and leasing rates are fueling TGH stock. Shares of the Bermuda-based company broke out from a 31.83 buy point from a cup base on Friday, surging 8.8% to 33.70. The buy range extended to 33.42, so Textainer stock technically is just out of range. Investors shouldn't buy extended stocks, especially in the current choppy market, but a slight pullback could easily bring TGH stock back into range.
Textainer's RS line is also at a new high.
Textainer buys, leases and resells marine cargo containers. TGH stock is up more than 80% since February, far outpacing rivals CAI International (CAI) and Triton International (TRTN).
Textainer's RS Rating is 97, and its EPS Rating is a top-notch 99. The company's posted four straight quarters of accelerating earnings. In the last quarter, Textainer earnings per share skyrocketed 582% to $1.16, while sales rose 16% $169 million.
Industry tracker FreightWaves says container shortages brought on by the interruption in shipping during the pandemic are not expected to resolve before 2022. While container production has resumed, Chinese manufacturers, which account for 80% of containers on the market, are keeping production in check to protect prices and profits.
The current price of new containers — $3,500 — is nearly double what it was in early 2020.
TDG stock broke out past a 633.14 buy point from a flat base Thursday. The chase zone extends to 664.80.
Its relative strength line has been moving up over the past week or so, after trending lower for six months as the stock went sideways. TransDigm stock rebounded from last year after crashing 70% from its early February peak to its late March low amid the sharp coronavirus bear market as aerospace demand plunged.
TransDigm makes actuators, controls, ignition systems, gear pumps and other components for the aerospace industry.
Its RS Rating is 62, while its EPS Rating is just 34, as year-over-year profitability has declined in the past four quarters. However, given how hard commercial airlines were hit during the pandemic, TransDigm held up pretty well, posting profits nonetheless.
TransDigm earnings are expected to fall 22% in fiscal 2021, with the company already in fiscal Q3. But EPS should bounce 53% in fiscal 2022, essentially at pre-pandemic levels.
Aviation-related stocks have an improved outlook as more airlines add flights amid a surge in leisure travel as Covid infections decrease and vaccination rates increase.
Shares gapped up 9% Thursday out of a flat base on raised production targets. EADSY stock nudged up further on Friday. Thursday's low of 32.30 can be considered the new buy point.
The European aerospace group expects air travel to take off soon. It told suppliers it plans to boost production of its popular short-haul A320 to 64 jets a month by Q2 2023 from a previous rate of 60. Airbus said it may raise production further to 70 by early 2024 and 75 by 2025. However, International Air Transport Association's director general, Willie Walsh, called the move overly optimistic.
The RS line for Airbus stock spiked up on Thursday, almost to a consolidation high. Its RS Rating is 81, while its EPS Rating 69. Unlike archrival Boeing (BA), Airbus expects to reach pre-pandemic profitability in 2022.