5 non-tech stocks hit by the chip shortage
The chip shortage that intensified last year has not only spread through 2021, but is getting worse. Apple (NASDAQ: AAPL), which has apparently weathered the shortage so far, expects supply constraints to affect its third-quarter revenue by $ 3-4 billion. Unprecedented demand for semiconductors even surprised a leading manufacturer Intelligence (NASDAQ: INTC) off guard, with the company having recently warned in at least two instances that it could take years to resolve the issue global chip shortage.
The point is, tech stocks aren’t the only ones feeling the pinch, as the shortage has started to affect almost every aspect of the market. manufacturing. Here are four non-tech stocks affected by the chip shortage.
No chip is stopping the growth of trucking
In the United States, retail sales of Class 8 heavy-duty trucks increased 52.8% in April, reflecting the strong recovery in the truck markets. The problem is that the demand is plentiful but the supply is not. Production of Class 8 trucks fell nearly 8% per day in April, according to research firm FTR. Aside from parts, a shortage of chip supply has added to the woes of truckers.
“The size of the 2021 market will be tempered by the under-supply of semiconductors across the industry,” said PACCAR‘s (NASDAQ: PCAR) CEO Preston Freight on the company’s first quarter earnings conference call. The owner of the Kenworth, Peterbilt and DAF brands delivered 3,000 fewer units in the first quarter and expects the trend to continue in the second quarter. PACCAR will only increase truck production during the year if the chip supply decreases.
Image source: Getty Images.
Worse yet, the shortage of raw materials typically hits aftermarket markets first as distributors prioritize sourcing for truck manufacturing. The chip shortage could therefore deal a double blow to PACCAR if things do not improve quickly, as the company made 21% of its total revenue from the parts segment last year. PACCAR last forecast 15-18% growth in parts sales this year, but it remains to be seen whether it can meet its target.
Car manufacturers lose a lot of money
The auto industry has been hit the hardest, and it’s no surprise why. Semiconductors were already widely used in all cars for navigation, security, and infotainment systems, among others, but demand has grown along with electric and self-driving cars. This explains why the actions of the electric vehicle manufacturer NIO (NYSE: NIO) has fallen to double digits in recent months. NIO temporarily halted production in March, reported a Sequential decline of 5.5% in May shipments and expects the chip shortage to hurt shipments in the second quarter.
Closer to home, Ford (NYSE: F) On its own expects a 50% drop in production in the second quarter and a loss of 1.1 million vehicles in 2021, which could cost it nearly $ 2.5 billion in adjusted profit before interest and taxes (EBIT). Ford has closed several factories, including some that make the Ranger and F-150 pickup trucks. Although management projects chip constraints to bottom out in the second quarter, they expect the shortage to continue until 2022.
Ford’s sales, on the other hand, rebounded sharply as the economy reopened – its April sales in the United States jumped 65% year-over-year. Ford’s first quarter net profit of $ 3.3 billion was actually its best first quarterly profit since 2011. The chip shortage, however, is a potential flaw in its armor, and Ford’s production cut could prove costly this year.
No chip, no cars, fewer rentals
Auto manufacturers’ chip supply issues have created the perfect storm for rental car companies. Vaccine deployments are expected to boost pent-up travel demand, but cuts in auto production have dampened rental companies’ fleet expansion plans.
Budget Opinion Group (NASDAQ: RCA) reported 12% daily revenue growth from the Americas in its first quarter. However, its total revenue fell 22% year-on-year and the net loss widened 8% in the first quarter. More importantly, management has not provided guidance for the full year as the chip shortage has added to the lingering uncertainty surrounding the pandemic. “The global semiconductor shortage is causing uncertainty in fleet supply and leading to a tightening of fleets across the industry,” management said in the release of the first quarter results.
Additionally, the shortage of new cars has forced rental car companies to fall back on used cars, but used car prices have already skyrocketed and are at all time highs. This is another thing investors in rental car stocks may want to keep in mind, especially in a stock like Avis Budget which has seen a dizzying rise in recent months.
Flea shortage harms the unexpected
The global chip shortage has started to worry caterpillar (NYSE: CAT). Semiconductor chips are widely used in construction equipment, mining trucks, oil and fuel pumps, and engine systems. Caterpillar also operates an autonomous mining fleet and is one of the industry pioneers in using Internet of Things technology for data mining and automation, all of which use chips.
In a recent interview with Reuters, Caterpillar CFO Andrew Bonfield warned that the company may not be able to meet all end-user demands as the chip shortage could impact its production further. late this year. Supply constraints, including those for semiconductors, are actually the main reason Caterpillar failed to provide any financial guidance for 2021 despite strong first quarter performance: its retail sales of machinery worldwide have grew 13% in the first quarter and its energy and transmission sales fell only 5%. % compared to double-digit declines in each of the previous three quarters.
I expect easier lineups for Caterpillar this year, as 2020 has been an exceptionally tough year, but chip shortages could hamper the growth of the world’s largest construction and mining equipment maker.
When will the flea shortage end?
Demand for chips continues to outstrip supply, and increasing production capacity may take months, meaning expectations that supply constraints will soon bottom out could still be optimistic. So while companies like Ford, NIO, Caterpillar, Avis Budget and PACCAR are trying to weather the crisis, the chip shortage will undeniably become a key growth obstacle for them in at least 2021.
10 stocks we like better than NIO
When investment geniuses David and Tom Gardner have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
David and Tom have just revealed what they believe to be the ten best stocks for investors to buy now … and NIO was not one of them! That’s right – they think these 10 stocks are even better buys.
* The portfolio advisor returns on May 11, 2021
Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns stock and recommends Apple, NIO and Paccar. The Motley Fool recommends Intel and recommends the following options: long calls at $ 57.50 in January 2023 on Intel, long calls at $ 120 in March 2023 on Apple, short purchases at $ 57.50 in January 2023 on Intel, and short calls at $ 130 in March 2023 on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.