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2 Auto Parts Retailers to Capitalize on Favorable Industry Dynamics
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The Zacks Automotive - Retail and Wholesale - Parts industry is holding up well, thanks to a mix of supportive trends. With many Americans opting to extend the life of their cars, the aging fleet continues to act as a tailwind for the industry’s long-term expansion. At the same time, vehicles are getting more complex, pushing many drivers to rely on professionals, thus giving a lift to the DIFM segment. Parts retailers are also expanding aggressively and going digital to better serve customers and drive efficiencies. Plus, near-term momentum in EV sales could give the sector another tailwind, especially for companies catering to the growing electric fleet. Two stocks worth considering from the industry are O’Reilly Automotive (ORLY - Free Report) and Advance Auto Parts (AAP - Free Report) .
Industry Overview
The Zacks Automotive - Retail and Wholesale - Parts industry players execute several functions. These include retailing, distribution and installation of vehicle parts, equipment and accessories. Vehicle parts and accessories include seat covers, antifreeze, engine additives, wiper blades, batteries, brake system components, belts, chassis parts, driveline parts, engine parts and fuel pumps. Consumers have two options. They can either opt for repairing vehicles on their own (the ‘do-it-yourself’ or ‘DIY’ segment) or take the assistance of a professional repair facility (the ‘do-it-for-me’ or ‘DIFM’ segment). The industry is highly competitive and undergoing a radical change, with evolving customer expectations and technological innovation acting as game changers.
Factors Deciding the Industry's Fate
Aging Vehicles Fuel Auto Parts Demand: The average age of vehicles in the United States has climbed to 12.6 years, a record high that’s boosting demand across the auto parts industry. As cars age, they require more frequent maintenance and part replacements, prompting consumers to invest more in upkeep rather than purchasing new vehicles. This trend is fueling steady growth for parts retailers and suppliers, as older vehicles become a key driver of aftermarket sales.
Tech Advances Shift Auto Repairs Toward Professionals: As modern vehicles become more advanced and tech-heavy, fixing them isn’t as straightforward as it used to be. Consumers opt for professional repair services, boosting the DIFM segment of the auto parts industry. With intricate electronic systems and specialized components now common in newer models, fewer drivers are attempting DIY fixes. This shift is gradually shrinking the DIY market’s share while opening up growth opportunities for parts suppliers and service providers catering to professional mechanics and repair shops.
Expansion and Digitization Drive Market Share Gains: Auto parts dealers are expanding through strategic acquisitions and the development of large distribution hubs, boosting their market presence and service capabilities. These moves are not only increasing market share but also allowing for faster delivery and improved customer reach. At the same time, companies are investing heavily in digital platforms to meet growing demand for online shopping and seamless service. This digital push is helping dealers tap into a wider audience, improve operational efficiency and enhance profitability.
Near-Term EV Surge Supports Auto Parts Demand: The EV market is experiencing a short-term boost, with U.S. sales hitting a record 607,089 units in the first half of 2025, up 1.5% year over year. Although second-quarter sales dipped 6.3% year over year, a 4.9% rise from the first quarter suggests that momentum is building ahead of federal incentive phase-outs in September. This anticipated third-quarter surge in EV purchases could provide a lift for auto parts retailers, particularly those stocking EV-specific components.
Zacks Industry Rank Signals Bright Prospects
The Zacks Auto Retail & Wholesale Parts industry is within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #63, which places it in the top 26% of 245 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are getting optimistic about this group’s earnings growth potential.
Before we present a few stocks that could still be on your watchlist, let’s take a look at the industry’s shareholder returns and current valuation first.
Industry Tops Sector & S&P 500
The Zacks Auto Retail and Wholesale Parts industry has outperformed the Auto, Tires and Truck sector and the Zacks S&P 500 composite over the past year. The industry has soared 17% over this period compared with the S&P 500’s growth of 13%. The sector has declined 3.1% in the same time frame.
One-Year Price Performance
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio.
Based on the trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 27.27X compared with the S&P 500’s 17.7X and the sector’s 21.01X.
Over the past five years, the industry has traded as high as 28.32X and as low as 21.41X, with the median being 24.67X, as the chart below shows.
EV/EBITDA Ratio (Past 5 Years)
2 Stocks in Focus
Advance Auto: It is primarily engaged in selling replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles, light and heavy-duty trucks.The sale of its Worldpac business to the Carlyle Group for $1.5 billion in late 2024 has bolstered liquidity and allows the company to refocus on its core operations, particularly its advanced blended box model. This narrowed focus is expected to drive stronger execution and more targeted decision-making. In March 2025, Advance Auto reached a key milestone by completing its store footprint optimization program, positioning the company to operate more efficiently across its retail network. Additionally, efforts to consolidate its supply chain into a single, unified network are expected to streamline operations and reduce costs.
Advance Auto currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its 2025 EPS implies year-over-year growth of a whopping 752%. The consensus mark for 2026 EPS suggests growth of 72% from 2025 projected levels.
O’Reilly Automotive: The company stands out as one of the leading players in the U.S. aftermarket auto parts space, with 32 consecutive years of record revenue growth. The company’s success is fueled by its aggressive store expansion strategy, robust distribution network, and a strong focus on customer service. In 2025, ORLY plans to ramp up inventory levels across stores, hubs, and distribution centers to ensure product availability in every market it serves, reflecting both operational discipline and demand confidence. The company also remains committed to rewarding shareholders, repurchasing 1.9 million shares for $2.08 billion in 2024, followed by another 0.4 million in the first quarter of 2025.
O’Reilly Automotive currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2025 EPS and sales indicates a year-over-year uptick of 5.4% and 6.2%, respectively. The consensus mark for 2026 EPS and sales suggests growth of 6.6% and 13% from 2025 projected levels, respectively.
Price & Consensus: ORLY
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2 Auto Parts Retailers to Capitalize on Favorable Industry Dynamics
The Zacks Automotive - Retail and Wholesale - Parts industry is holding up well, thanks to a mix of supportive trends. With many Americans opting to extend the life of their cars, the aging fleet continues to act as a tailwind for the industry’s long-term expansion. At the same time, vehicles are getting more complex, pushing many drivers to rely on professionals, thus giving a lift to the DIFM segment. Parts retailers are also expanding aggressively and going digital to better serve customers and drive efficiencies. Plus, near-term momentum in EV sales could give the sector another tailwind, especially for companies catering to the growing electric fleet. Two stocks worth considering from the industry are O’Reilly Automotive (ORLY - Free Report) and Advance Auto Parts (AAP - Free Report) .
Industry Overview
The Zacks Automotive - Retail and Wholesale - Parts industry players execute several functions. These include retailing, distribution and installation of vehicle parts, equipment and accessories. Vehicle parts and accessories include seat covers, antifreeze, engine additives, wiper blades, batteries, brake system components, belts, chassis parts, driveline parts, engine parts and fuel pumps. Consumers have two options. They can either opt for repairing vehicles on their own (the ‘do-it-yourself’ or ‘DIY’ segment) or take the assistance of a professional repair facility (the ‘do-it-for-me’ or ‘DIFM’ segment). The industry is highly competitive and undergoing a radical change, with evolving customer expectations and technological innovation acting as game changers.
Factors Deciding the Industry's Fate
Aging Vehicles Fuel Auto Parts Demand: The average age of vehicles in the United States has climbed to 12.6 years, a record high that’s boosting demand across the auto parts industry. As cars age, they require more frequent maintenance and part replacements, prompting consumers to invest more in upkeep rather than purchasing new vehicles. This trend is fueling steady growth for parts retailers and suppliers, as older vehicles become a key driver of aftermarket sales.
Tech Advances Shift Auto Repairs Toward Professionals: As modern vehicles become more advanced and tech-heavy, fixing them isn’t as straightforward as it used to be. Consumers opt for professional repair services, boosting the DIFM segment of the auto parts industry. With intricate electronic systems and specialized components now common in newer models, fewer drivers are attempting DIY fixes. This shift is gradually shrinking the DIY market’s share while opening up growth opportunities for parts suppliers and service providers catering to professional mechanics and repair shops.
Expansion and Digitization Drive Market Share Gains: Auto parts dealers are expanding through strategic acquisitions and the development of large distribution hubs, boosting their market presence and service capabilities. These moves are not only increasing market share but also allowing for faster delivery and improved customer reach. At the same time, companies are investing heavily in digital platforms to meet growing demand for online shopping and seamless service. This digital push is helping dealers tap into a wider audience, improve operational efficiency and enhance profitability.
Near-Term EV Surge Supports Auto Parts Demand: The EV market is experiencing a short-term boost, with U.S. sales hitting a record 607,089 units in the first half of 2025, up 1.5% year over year. Although second-quarter sales dipped 6.3% year over year, a 4.9% rise from the first quarter suggests that momentum is building ahead of federal incentive phase-outs in September. This anticipated third-quarter surge in EV purchases could provide a lift for auto parts retailers, particularly those stocking EV-specific components.
Zacks Industry Rank Signals Bright Prospects
The Zacks Auto Retail & Wholesale Parts industry is within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #63, which places it in the top 26% of 245 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are getting optimistic about this group’s earnings growth potential.
Before we present a few stocks that could still be on your watchlist, let’s take a look at the industry’s shareholder returns and current valuation first.
Industry Tops Sector & S&P 500
The Zacks Auto Retail and Wholesale Parts industry has outperformed the Auto, Tires and Truck sector and the Zacks S&P 500 composite over the past year. The industry has soared 17% over this period compared with the S&P 500’s growth of 13%. The sector has declined 3.1% in the same time frame.
One-Year Price Performance
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio.
Based on the trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 27.27X compared with the S&P 500’s 17.7X and the sector’s 21.01X.
Over the past five years, the industry has traded as high as 28.32X and as low as 21.41X, with the median being 24.67X, as the chart below shows.
EV/EBITDA Ratio (Past 5 Years)
2 Stocks in Focus
Advance Auto: It is primarily engaged in selling replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles, light and heavy-duty trucks.The sale of its Worldpac business to the Carlyle Group for $1.5 billion in late 2024 has bolstered liquidity and allows the company to refocus on its core operations, particularly its advanced blended box model. This narrowed focus is expected to drive stronger execution and more targeted decision-making. In March 2025, Advance Auto reached a key milestone by completing its store footprint optimization program, positioning the company to operate more efficiently across its retail network. Additionally, efforts to consolidate its supply chain into a single, unified network are expected to streamline operations and reduce costs.
Advance Auto currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its 2025 EPS implies year-over-year growth of a whopping 752%. The consensus mark for 2026 EPS suggests growth of 72% from 2025 projected levels.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: AAP
O’Reilly Automotive: The company stands out as one of the leading players in the U.S. aftermarket auto parts space, with 32 consecutive years of record revenue growth. The company’s success is fueled by its aggressive store expansion strategy, robust distribution network, and a strong focus on customer service. In 2025, ORLY plans to ramp up inventory levels across stores, hubs, and distribution centers to ensure product availability in every market it serves, reflecting both operational discipline and demand confidence. The company also remains committed to rewarding shareholders, repurchasing 1.9 million shares for $2.08 billion in 2024, followed by another 0.4 million in the first quarter of 2025.
O’Reilly Automotive currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2025 EPS and sales indicates a year-over-year uptick of 5.4% and 6.2%, respectively. The consensus mark for 2026 EPS and sales suggests growth of 6.6% and 13% from 2025 projected levels, respectively.
Price & Consensus: ORLY