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2 Auto Retail Parts Stocks Worth Watching as Aftermarket Demand Grows
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The Zacks Automotive - Retail and Wholesale - Parts industry outlook remains broadly favorable, supported by resilient vehicle demand, an aging U.S. vehicle fleet and growing reliance on professional repairs. These trends should sustain demand for replacement parts and aftermarket services. However, rising investments in technology, distribution and digital capabilities could dampen cash flows and margins. Companies will need disciplined capital allocation and strong execution to navigate evolving industry dynamics. Two industry players worth considering now are O’Reilly Automotive (ORLY - Free Report) and Advance Auto Parts (AAP - Free Report) .
About the Industry
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.
Key Investing Themes
New-Vehicle Demand Remains Resilient: New-vehicle demand continues to provide a supportive backdrop for the auto retail parts industry. U.S. August sales reached a 16.8 million annualized rate per Cox Automotive, exceeding the 16.3 million forecast, while year-to-date sales are tracking slightly above expectations. Relatively strong demand among higher-income consumers has helped offset inflationary pressures. Asian automakers also posted solid results, while hybrid demand remained healthy across several brands. Sustained vehicle sales are encouraging for parts retailers, as a larger vehicle base can translate into greater demand for accessories, replacement parts and other aftermarket products.
Aging Vehicles Are Driving Aftermarket Demand: The U.S. vehicle fleet is getting older, creating a favorable environment for auto parts retailers. The average vehicle age is 12.8 years, and older cars generally require more frequent maintenance and repairs. Consumers are also keeping their vehicles longer rather than replacing them, further supporting aftermarket spending. As vehicles age, demand for replacement components and repair services tends to increase. This trend should continue to support parts retailers and repair shops.
Higher Investment Is Weighing on Profits: Auto parts companies face growing pressure to invest in their businesses to remain competitive. Spending on EV-related technologies, advanced vehicle systems, distribution infrastructure and digital capabilities is increasing as customer and industry needs evolve. While these investments can strengthen long-term growth, they also require substantial capital and can weigh on cash flow and margins in the near term. Companies therefore need to balance investments in future growth with disciplined cost management. Efficient capital allocation will remain critical as the industry adapts to rapid technological and structural changes.
Complex Vehicles Are Shifting Repairs Toward Professionals: As vehicles become more technologically advanced, repairing them at home is becoming increasingly difficult. Modern cars feature sophisticated electronics, sensors and specialized systems that often require professional expertise and equipment. This is encouraging more consumers to rely on professional repair shops rather than handling repairs themselves. While this trend could limit growth in the DIY portion of the aftermarket, it creates an opportunity in the “do-it-for-me” (DIFM) segment. Parts retailers that have strong relationships with professional technicians and repair shops are therefore well positioned to benefit from this shift.
Zacks Industry Rank Is Encouraging
The Zacks Auto Retail & Wholesale Parts industry is within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #75, which places it in the top 30% of roughly 245 Zacks industries.
The group’s Zacks Industry Rank, which is 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 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 be on your watchlist, let’s take a look at the industry’s shareholder returns and current valuation first.
Industry Lags S&P 500, Tops Sector
The Zacks Auto Retail and Wholesale Parts industry has underperformed the Zacks S&P 500 composite but outperformed Auto, Tires and Truck sector over the past year. The industry has declined 5.6% over this period against the S&P 500’s growth of 11.4%. The sector has lost 12.1% over 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 22.91X compared with the S&P 500’s 17.75X and the sector’s 25.75X.
Over the past five years, the industry has traded as high as 32.63X and as low as 22.15X, with the median being 26.22X, as the chart below shows.
EV/EBITDA Ratio (Past 5 Years)
2 Stocks in Focus
O’Reilly: It is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. The company has been generating record revenues for 33 consecutive years.O’Reilly continues to gain share across professional and DIY channels while expanding its store and distribution network.
The company opened 110 net new stores in the first half of 2026 and remains on track for 225-235 openings for the year. To support the growth, 2026 capex will rise to $1.3-$1.4 billion, funded by heightened investments in store fleet refreshes and new distribution infrastructure.
The auto parts retailer keeps returning excess capital through buybacks. It repurchased 26.7 million shares for $2.43 billion in the first half of 2026 and another 7.3 million shares for $632 million through July 29.
O’Reilly currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2026 and 2027 EPS implies year-over-year growth of 10% and 11%, respectively. The consensus mark for the current and next year has moved north by 3 cents and 2 cents, respectively, over the past 60 days.
Advance Auto: It primarily sells replacement parts, batteries, accessories, and maintenance products for a broad range of vehicles. Advance Auto continues to gain traction with Main Street Pro customers, its preferred professional segment. Strategic sourcing, better assortment and tighter pricing are improving AAP’s product economics.
Advance Auto is returning to selective expansion. It plans 30 to 35 new store openings in fiscal 2026 and uses population, vehicle profiles, competition and real-estate economics in site selection. This supports measured network growth after the footprint reset.
The company completed its distribution-center consolidation in the second quarter of fiscal 2026 and now operates 15 DCs on one warehouse system. It opened five market hubs in the first half, reaching 38, and raised fiscal 2026 hub-opening plans to 15 to 20 from 10 to 15. AAP still targets 60 hubs by mid-2027.
Advance Auto currently carries a Zacks Rank #3. The Zacks Consensus Estimate for its fiscal 2026 and 2027 EPS implies year-over-year growth of 32% and 28%, respectively. The consensus mark for the current fiscal year has moved north by 4 cents over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
2 Auto Retail Parts Stocks Worth Watching as Aftermarket Demand Grows
The Zacks Automotive - Retail and Wholesale - Parts industry outlook remains broadly favorable, supported by resilient vehicle demand, an aging U.S. vehicle fleet and growing reliance on professional repairs. These trends should sustain demand for replacement parts and aftermarket services. However, rising investments in technology, distribution and digital capabilities could dampen cash flows and margins. Companies will need disciplined capital allocation and strong execution to navigate evolving industry dynamics. Two industry players worth considering now are O’Reilly Automotive (ORLY - Free Report) and Advance Auto Parts (AAP - Free Report) .
About the Industry
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.
Key Investing Themes
New-Vehicle Demand Remains Resilient: New-vehicle demand continues to provide a supportive backdrop for the auto retail parts industry. U.S. August sales reached a 16.8 million annualized rate per Cox Automotive, exceeding the 16.3 million forecast, while year-to-date sales are tracking slightly above expectations. Relatively strong demand among higher-income consumers has helped offset inflationary pressures. Asian automakers also posted solid results, while hybrid demand remained healthy across several brands. Sustained vehicle sales are encouraging for parts retailers, as a larger vehicle base can translate into greater demand for accessories, replacement parts and other aftermarket products.
Aging Vehicles Are Driving Aftermarket Demand: The U.S. vehicle fleet is getting older, creating a favorable environment for auto parts retailers. The average vehicle age is 12.8 years, and older cars generally require more frequent maintenance and repairs. Consumers are also keeping their vehicles longer rather than replacing them, further supporting aftermarket spending. As vehicles age, demand for replacement components and repair services tends to increase. This trend should continue to support parts retailers and repair shops.
Higher Investment Is Weighing on Profits: Auto parts companies face growing pressure to invest in their businesses to remain competitive. Spending on EV-related technologies, advanced vehicle systems, distribution infrastructure and digital capabilities is increasing as customer and industry needs evolve. While these investments can strengthen long-term growth, they also require substantial capital and can weigh on cash flow and margins in the near term. Companies therefore need to balance investments in future growth with disciplined cost management. Efficient capital allocation will remain critical as the industry adapts to rapid technological and structural changes.
Complex Vehicles Are Shifting Repairs Toward Professionals: As vehicles become more technologically advanced, repairing them at home is becoming increasingly difficult. Modern cars feature sophisticated electronics, sensors and specialized systems that often require professional expertise and equipment. This is encouraging more consumers to rely on professional repair shops rather than handling repairs themselves. While this trend could limit growth in the DIY portion of the aftermarket, it creates an opportunity in the “do-it-for-me” (DIFM) segment. Parts retailers that have strong relationships with professional technicians and repair shops are therefore well positioned to benefit from this shift.
Zacks Industry Rank Is Encouraging
The Zacks Auto Retail & Wholesale Parts industry is within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #75, which places it in the top 30% of roughly 245 Zacks industries.
The group’s Zacks Industry Rank, which is 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 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 be on your watchlist, let’s take a look at the industry’s shareholder returns and current valuation first.
Industry Lags S&P 500, Tops Sector
The Zacks Auto Retail and Wholesale Parts industry has underperformed the Zacks S&P 500 composite but outperformed Auto, Tires and Truck sector over the past year. The industry has declined 5.6% over this period against the S&P 500’s growth of 11.4%. The sector has lost 12.1% over 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 22.91X compared with the S&P 500’s 17.75X and the sector’s 25.75X.
Over the past five years, the industry has traded as high as 32.63X and as low as 22.15X, with the median being 26.22X, as the chart below shows.
EV/EBITDA Ratio (Past 5 Years)
2 Stocks in Focus
O’Reilly: It is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. The company has been generating record revenues for 33 consecutive years.O’Reilly continues to gain share across professional and DIY channels while expanding its store and distribution network.
The company opened 110 net new stores in the first half of 2026 and remains on track for 225-235 openings for the year. To support the growth, 2026 capex will rise to $1.3-$1.4 billion, funded by heightened investments in store fleet refreshes and new distribution infrastructure.
The auto parts retailer keeps returning excess capital through buybacks. It repurchased 26.7 million shares for $2.43 billion in the first half of 2026 and another 7.3 million shares for $632 million through July 29.
O’Reilly currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2026 and 2027 EPS implies year-over-year growth of 10% and 11%, respectively. The consensus mark for the current and next year has moved north by 3 cents and 2 cents, respectively, over the past 60 days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: ORLY
Advance Auto: It primarily sells replacement parts, batteries, accessories, and maintenance products for a broad range of vehicles. Advance Auto continues to gain traction with Main Street Pro customers, its preferred professional segment. Strategic sourcing, better assortment and tighter pricing are improving AAP’s product economics.
Advance Auto is returning to selective expansion. It plans 30 to 35 new store openings in fiscal 2026 and uses population, vehicle profiles, competition and real-estate economics in site selection. This supports measured network growth after the footprint reset.
The company completed its distribution-center consolidation in the second quarter of fiscal 2026 and now operates 15 DCs on one warehouse system. It opened five market hubs in the first half, reaching 38, and raised fiscal 2026 hub-opening plans to 15 to 20 from 10 to 15. AAP still targets 60 hubs by mid-2027.
Advance Auto currently carries a Zacks Rank #3. The Zacks Consensus Estimate for its fiscal 2026 and 2027 EPS implies year-over-year growth of 32% and 28%, respectively. The consensus mark for the current fiscal year has moved north by 4 cents over the past 30 days.
Price & Consensus: AAP