Due to logistic disruptions and lingering macroeconomic headwinds, many market research firms have slashed their auto sales estimates. Declining sales might harm the auto parts industry in the short term. LMC Automotive reduced its vehicle sales forecast to 13.8 million units, down 7% from 2021 volumes.
However, rapid technological advancements, lucrative government initiatives, a focus on car accessories, and the growing electric vehicles (EVs) market will drive the growth of the auto parts industry in the coming years. According to Research and Markets, the motor vehicle parts market is projected to grow at 7.9% from 2021 to 2026.
While quality auto parts stocks O’Reilly Automotive, Inc. (ORLY), AutoZone, Inc. (AZO), and The Goodyear Tire & Rubber Company (GT) could be ideal additions to your portfolio, Luminar Technologies, Inc. (LAZR) might be best avoided considering its bleak fundamentals.
Stocks to Buy:
O’Reilly Automotive, Inc. (ORLY)
ORLY and its subsidiaries operate as a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States.
On July 27, 2022, Greg Johnson, ORLY’s President, and CEO, said, “We are extremely proud of Team O’Reilly’s ability to deliver continued growth on top of the strongest years in our Company’s history.”
ORLY’s sales came in at $3.67 billion for the second quarter ended June 30, 2022, up 6% year-over-year. Moreover, the company’s gross profit came in at $1.88 billion, up 3.2% year-over-year. Also, its EPS came in at $8.78, up 5.4% year-over-year.
ORLY’s revenue is expected to increase 6.1% year-over-year to $14.14 billion in 2022. Its EPS is expected to increase 2.3% year-over-year to $31.83 in 2022. Over the past year, the stock has gained 11.2% to close the last trading session at $693.19.
ORLY’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ORLY has an A grade for Quality and a B grade for Sentiment. Within the B-rated Auto Parts industry, it is ranked #15 out of 64 stocks.
Beyond what is stated above, we’ve also rated ORLY for Value, Growth, Momentum, and Stability. Get all ORLY ratings here.
AutoZone, Inc. (AZO)
AZO is involved in retailing and distribution of automotive replacement parts and accessories. The company operates in three segments: Auto Parts Store; ALLDATA; and e-commerce. The company offers various products for cars, sport utility vehicles, vans, and light trucks.
On September 19, 2022, Bill Rhodes, Chairman, President, and CEO, said, “Our results are a testament to our AutoZoners’ ongoing commitment to delivering exceptional customer service daily. Our retail business performed well this quarter, ending with positive same-store sales on top of last year’s strong performance”.
AZO’s net sales came in at $5.35 billion for the fourth quarter ended August 27, 2022, up 8.9% year-over-year. The company’s net income came in at $810.04 million, up 3.1% year-over-year, while its EPS came in at $40.51, up 13.4% year-over-year.
Street expects AZO’s revenue to increase 4.8% year-over-year to $17.04 billion in 2023. It surpassed EPS estimates in all four trailing quarters. Its EPS is expected to increase 5.8% year-over-year to $124.01 in 2023. Over the past year, the stock has gained 24.1% to close the last trading session at $2,099.50.
AZO’s overall B rating equates to a Buy in our POWR Ratings system. It has an A grade for Quality. The stock is ranked #26 in the Auto Parts industry.
We’ve also rated AZO for Stability, Growth, Sentiment, Value, and Momentum. Get all AZO ratings here.
The Goodyear Tire & Rubber Company (GT)
GT and its subsidiaries develop, manufacture, distribute, and sell tires and related products and services worldwide. The company operates through three regional segments: Americas; Europe, Middle East, and Africa (EMEA); and the Asia Pacific.
On September 1, 2022, GT launched the all-new Goodyear ElectricDrive™ all-season tire and two new sizes for its ultra-high-performance tire, the Goodyear ElectricDrive™ GT. These new products aim to expand the company’s portfolio and enhance its revenues.
On July 20, 2022, GT joined Lockheed Martin (LMT) to commercialize lunar mobility. It will help the company expand its horizons by providing tires for NASA’s Artemis program to live and work on the moon.
GT’s net sales came in at $5.21 billion for the second quarter ended June 30, 2022, up 31% year-over-year. Moreover, the company’s net income came in at $166 million, up 147.8% year-over-year. Also, its EPS came in at $0.58, up 114.8% year-over-year.
GT’s revenue is expected to increase 19.9% year-over-year to $20.96 billion in 2022. It surpassed EPS estimates in each of the four trailing quarters. GT’s shares have lost marginally intraday to close the last trading session at $10.87.
GT’s overall B rating equates to a Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Growth. The stock is ranked #21 in the same industry.
We’ve also rated GT for Stability, Sentiment, Momentum, and Quality. Get all GT ratings here.
Stock to Sell:
Luminar Technologies, Inc. (LAZR)
LAZR provides sensor technologies and software for passenger cars and commercial trucks in North America, Asia Pacific, Europe, and the Middle East. It has two business segments: Autonomy Solutions; and Components.
On September 22, 2022, Northland Capital Markets analyst Gus Richard downgraded LAZR from Outperform to Market Perform.
LAZR’s gross loss came in at $18.16 million for the second quarter ended June 30, 2022, up 1,076.2% year-over-year. Its loss from operations came in at $104.44 million, up 136.3% year-over-year. Moreover, the company’s loss per share came in at $0.27, up 145.5% year-over-year.
LAZR’s EPS is estimated to decrease 100% year-over-year to negative $0.76 in 2022. It missed EPS estimates in three of the four trailing quarters. Over the past year, the stock has lost 56.1% to close the last trading session at $7.64.
LAZR has an overall F grade, equating to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Value, Quality, and Stability and a D for Growth and Sentiment.
Click here to access the LAZR ratings for Momentum. It is ranked last in the same industry.
ORLY shares were trading at $718.96 per share on Wednesday afternoon, up $25.77 (+3.72%). Year-to-date, ORLY has gained 1.80%, versus a -20.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More…