NEW YORK (AP) — Shares of several auto suppliers rose Monday, along with the broader market, on expectations that automakers will continue to increase vehicle production for the rest of this year and into next, boosting demand for the components that go into them.
On Thursday, automakers reported a combined November sales increase of 14 percent, as more drivers replaced aging vehicles. It was the fastest sales pace since August 2009, when the government offered big rebates for drivers to trade in their gas-guzzling clunkers.
In addition, better inventories at Japanese automakers brought some car shoppers back to the market. Automakers like Toyota and Honda have struggled to stock their lots with enough cars and trucks in the months since the March earthquake and tsunami in Japan.
The disaster cut off supplies of critical parts and forced the automaker to cut production both in the U.S. and Japan. November marked Toyota's first sales increase since April.
Baird analyst David Leiker said automakers are poised to make more vehicles in the fourth quarter of this year and the first quarter of next year than originally expected. He said he now expects vehicle production to be up about 15 percent in the fourth quarter and 10 percent in next year's first quarter.
As a result, the companies that supply the automakers should also see their volumes increase, the analyst said.
"We maintain auto suppliers are poised to outperform in 2012, with forecasts for 15 percent to 20 percent earnings growth supporting upside from current prices," Leiker wrote in a Friday note to investors.
Leiker recommended that investors pick up shares of high-quality companies with strong growth prospects and reasonable share prices such as Gentex Corp., Johnson Controls Inc., BorgWarner Inc. and Autoliv Inc.
In midday trading, Gentex shares rose 89 cents, or 2.9 percent, to $32; Johnson Controls added $1, or 3.2 percent, to $32.73; BorgWarner rose $2.51, or 3.7 percent, to $69.62; and Autoliv added $1.86, or 3.4 percent, to $56.
Meanwhile, stocks rose broadly on hopes for a plan to restore long-term confidence in the euro. The Dow Jones industrial average jumped 150 points, led by banks.