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Auto Parts: Staying in Overdrive

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As icy roads from this epic U.S. winter thaw, more people and businesses will be hitting the highway, with the demand for auto replacement parts in tow. Last week, original equipment manufacturing for auto and truck replacement parts (AUTO/TRUCK-REPL) was shining at the #1 rank on the Zacks Industry List. You can’t do better than that!

This industry of 8 companies recently saw 12 positive revisions to annual earnings estimates compared to 4 negative revisions. Positive earnings surprises have been averaging a strong +20%. Of course, downward earnings surprises are present. However, the sector has signaled a turn for the positive, and a couple businesses seem to have the green light.

We’ve seen this trend reflected in a downstream part of the auto value chain -- Retail/Wholesale Auto Parts. This is a six-company industry also at a #1 rank on the Zacks Industry Rank this week. With a continued build in play for cyclical auto spending, the picture is one with important indicators of strong and broad demand trends. That will drive future positive earnings estimate revisions.

Significant upward revision of the Zacks Rank within an industry group, changing from a Hold to either a Buy or Strong Buy rank, is a sound signal when looking for investment advantages. Using knowledge of recent positive earnings estimate revision activity by company analysts in the know provides that key insight.

Look closely at the following summaries of two high Zacks Rank candidates. Each was selected based on its current Zacks Rank #1 (Strong Buy) or Zacks Rank #2, and a recent revision from Zacks Rank #3 (Hold).

Your profits could mirror these successes. Those returns may be closer than they appear.

Motorcar Parts & Accessories (MPAA - Free Report) : With a stunning 29% YTD return, these shares have been a momentum play in 2014. It’s a Zacks Rank #1 stock in a Number One Zacks Ranked Industry. What more is there to say? The last three earning beats were +47%, +33% and +50%.  

This company is a leading manufacturer of replacement alternators and starters for imported and domestic cars and light trucks in the U.S. and Canada. The company's full line of alternators and starters are remanufactured for vehicles imported from Japan, Germany, Sweden, France and Korea. The imported vehicles for which the company remanufactures alternators and starters also include vehicles produced by GM, Chrysler and Ford.

Dorman (DORM - Free Report) : With a 7% return YTD, this Zacks Rank #2 company has been delivering in a sideways market. For 2015, analysts look for +15% annual EPS growth on +9% revenue growth. For a U.S. company, that’s an "outperform" story. Dorman beat or met quarterly earnings in eight of the last ten quarters.

This company is a leading supplier of Dealer "Exclusive" automotive replacement parts to the Automotive Aftermarket and Mass Merchandise markets. Dorman automotive parts and hardware are marketed under the OE Solutions, HELP, AutoGrade, First Stop, Conduct-Tite, Pik-A-Nut and Scan-Tech brand names.

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