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Auto Retail & Wholesale Parts Outlook: Smooth Ride Ahead
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The Zacks Automotive - Retail And Wholesale - Parts industry deals with the manufacturing, distribution, retailing, and installation of vehicle parts, equipment and accessories. Consumers may opt for repairing their vehicles on their own (the ‘do-it-yourself’ or ‘DIY’ segment) or they can take the assistance of a professional repair facility (the ‘do-it-for me’ or ‘DIFM’ segment).
The industry includes prominent names such as Advance Auto Parts, Inc. (AAP - Free Report) , AutoZone, Inc. (AZO - Free Report) , O’Reilly Automotive, Inc. (ORLY - Free Report) and others.
Let’s take a look at the industry’s three major themes:
• Presently, the Auto Retail & Wholesale Parts industry enjoys some advantages. Favorable macroeconomic conditions and higher demand for automobiles, including growing demand for complex-technology embedded cars have given a boost to this industry.
• Occasional new model launches and introduction of more complicated and high-tech vehicles have compelled consumers to opt for more professional assistance. Additionally, higher per capita disposable income and corporate profit have provided further impetus to the industry.
• The transition to autonomous and electric vehicles may create opportunities for the industry. However, there are some temporary issues that need to be addressed.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Automotive - Retail And Wholesale - Parts industry is a five-stock group within the broader Zacks Auto sector. The industry currently carries a Zacks Industry Rank #27, which places it in the top 11% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Over the past year, the industry’s earnings estimate for the current year has gone up 12.5%.
Before we present a few Automotive - Retail And Wholesale - Parts stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms Both Sector and S&P 500
Over the past year, the Automotive - Retail And Wholesale - Parts industry has outperformed its own sector as well as the Zacks S&P 500 composite.
Over this period, the industry has increased 25% against the sector’s decline of 238% and Zacks S&P 500 composite’s decline of 3.5%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is a commonly used multiple for valuing auto stocks, the industry is currently trading at 21.06 compared with the S&P 500’s 10.21. It is also above the sector’s trailing-12-month EV/EBITDA of 7.43X.
Over the past five years, the industry has traded as high as 22.35X, as low as 15.23X and at the median of 16.94X, as the chart below shows.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
Bottom Line
Changes in preference of consumers, frequent model launches and introduction of more high-tech vehicles have resulted in huge demand for auto parts. This has brightened revenue growth prospects of the industry.
However, the industry is not free from short-term snags. The uncertainty over trade issues needs to be settled for a clear growth trajectory.
O’Reilly Automotive: The Zacks Consensus Estimate for current-year earnings of this company has remained unchanged at $16.10 per share over the past 30 days.
Price and Consensus: ORLY
AutoZone: The Zacks Consensus Estimate for current-quarter earnings of this company has moved 1.1% north over the past 30 days.
Price and Consensus: AZO
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Auto Retail & Wholesale Parts Outlook: Smooth Ride Ahead
The Zacks Automotive - Retail And Wholesale - Parts industry deals with the manufacturing, distribution, retailing, and installation of vehicle parts, equipment and accessories. Consumers may opt for repairing their vehicles on their own (the ‘do-it-yourself’ or ‘DIY’ segment) or they can take the assistance of a professional repair facility (the ‘do-it-for me’ or ‘DIFM’ segment).
The industry includes prominent names such as Advance Auto Parts, Inc. (AAP - Free Report) , AutoZone, Inc. (AZO - Free Report) , O’Reilly Automotive, Inc. (ORLY - Free Report) and others.
Let’s take a look at the industry’s three major themes:
• Presently, the Auto Retail & Wholesale Parts industry enjoys some advantages. Favorable macroeconomic conditions and higher demand for automobiles, including growing demand for complex-technology embedded cars have given a boost to this industry.
• Occasional new model launches and introduction of more complicated and high-tech vehicles have compelled consumers to opt for more professional assistance. Additionally, higher per capita disposable income and corporate profit have provided further impetus to the industry.
• The transition to autonomous and electric vehicles may create opportunities for the industry. However, there are some temporary issues that need to be addressed.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Automotive - Retail And Wholesale - Parts industry is a five-stock group within the broader Zacks Auto sector. The industry currently carries a Zacks Industry Rank #27, which places it in the top 11% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Over the past year, the industry’s earnings estimate for the current year has gone up 12.5%.
Before we present a few Automotive - Retail And Wholesale - Parts stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms Both Sector and S&P 500
Over the past year, the Automotive - Retail And Wholesale - Parts industry has outperformed its own sector as well as the Zacks S&P 500 composite.
Over this period, the industry has increased 25% against the sector’s decline of 238% and Zacks S&P 500 composite’s decline of 3.5%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is a commonly used multiple for valuing auto stocks, the industry is currently trading at 21.06 compared with the S&P 500’s 10.21. It is also above the sector’s trailing-12-month EV/EBITDA of 7.43X.
Over the past five years, the industry has traded as high as 22.35X, as low as 15.23X and at the median of 16.94X, as the chart below shows.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
Bottom Line
Changes in preference of consumers, frequent model launches and introduction of more high-tech vehicles have resulted in huge demand for auto parts. This has brightened revenue growth prospects of the industry.
However, the industry is not free from short-term snags. The uncertainty over trade issues needs to be settled for a clear growth trajectory.
Currently, O’Reilly Automotive and AutoZone, which belong to this industry, carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
O’Reilly Automotive: The Zacks Consensus Estimate for current-year earnings of this company has remained unchanged at $16.10 per share over the past 30 days.
Price and Consensus: ORLY
AutoZone: The Zacks Consensus Estimate for current-quarter earnings of this company has moved 1.1% north over the past 30 days.
Price and Consensus: AZO
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>