3 Auto Parts Stocks to Pay Attention to in 2023 and 1 to Avoid

Amid rising environmental concerns and inflating fuel prices, the recent shift in consumer interest in electric vehicles should bolster the auto parts industry’s growth prospects. Moreover, given the growing market for used cars, the need for auto parts is expected to keep up.

Furthermore, lucrative government initiatives, rapid technological advancements, and a shift of focus on car accessories should propel growth 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.

However, aggressive policy tightening by the Fed has increased car loan rates, dampening demand. Moreover, supply chain disruptions and lingering macroeconomic headwinds might harm the auto parts industry.

While fundamentally strong auto parts stocks O’Reilly Automotive, Inc. (ORLY), Bridgestone Corporation (BRDCY), and Garrett Motion Inc. (GTX) 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 operates as a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories. The company also provides new and remanufactured automotive hard parts and maintenance items.

ORLY’s sales increased 9.2% year-over-year to $3.80 billion for the fiscal third quarter that ended September 30, 2022. The company’s gross profit increased 6.4% year-over-year to $1.93 billion. Its net income increased 4.8% from the year-ago period to $585.44 million, while its EPS rose 13.6% from the prior-year quarter to $9.17.

Street expects ORLY’s EPS for the fourth fiscal quarter (ended December 2022) to rise 1.2% year-over-year to $7.73. Its revenue is expected to grow 6.3% year-over-year to $3.50 billion in the same quarter.

Over the past six months, the stock has gained 24.1% to close its last trading session at $810.85. It has gained 11.5% over the past three months.

ORLY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade in Quality. The stock is ranked #21 out of 62 stocks in the A-rated Auto Parts industry.

Click here to access additional ratings for ORLY for Growth, Value, Momentum, Stability, and Sentiment.

Bridgestone Corporation (BRDCY)

Headquartered in Tokyo, Japan, BRDCY manufactures and sells tires and rubber products. It operates in two segments: Tires and Diversified Products. The company offers tires and tire tubes for passenger cars, trucks, buses, construction and mining vehicles, industrial machinery, agricultural machinery, aircraft, motorcycles, scooters, etc.

BRDCY pays a $0.61 per share dividend annually, which translates to a 3.31% yield on the current share price. Its four-year dividend yield is 3.54%.

During the nine months ended September 30, 2022, BRDCY’s revenue increased 28.4% year-over-year to ¥2.98 trillion ($22.88 billion). The company’s gross profit grew 21.2% from the prior-year period to ¥1.15 trillion ($8.80 billion). Its operating profit rose 11% year-over-year to ¥307.23 billion

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2 Dirt-Cheap Auto Stocks to Buy Right Now

Semiconductor shortages and supply chain issues affected vehicle production and inventory levels in the past two years. However, factories are stepping up their pace as consumers intend to buy more vehicles this year.

U.S. auto sales rose to an estimated 13.2 million rate in December 2022. Moreover, auto sales will likely rebound this year, driven by growing demand and a recovery in vehicle production amid easing supply chain disruptions and chip recovery that will offset the effects of inflation and increasing interest rates.

Furthermore, the automotive industry continues to focus on developing electric vehicles (EVs), whether it is through improving battery performance or increasing charging infrastructure. According to Motor Intelligence data, Americans purchased over 724,000 EVs in the first eleven months of 2022, compared to 326,000 EVs acquired in 2019.

The global EV market is projected to reach $34.40 billion by 2031, growing at a CAGR of 20.3%. Increasing global climatic concerns and surging gasoline and oil prices should drive the demand for fuel-efficient EVs in the upcoming years.

Hence, to capitalize on the industry’s promising growth prospects, it could be wise to invest in fundamentally sound auto stocks General Motors Company (GM) and Mazda Motor Corporation (MZDAY), trading currently at discounted valuations.

General Motors Company (GM)

GM builds and markets trucks, crossovers, and cars, along with auto parts and accessories, all over the world. It operates through GM North America; GM International; Cruise; and GM Financial segments. It also offers its customers safety and security services.

On January 4, 2023, GM announced that it delivered 2.20 million vehicles in the United States, leading the industry in overall sales. It also extended its leadership in significant market sectors, such as full-size pickups, full-size SUVs, and more. The company intends to capitalize on this momentum in North America in 2023 by increasing its EV market share with nine models on the market.

This new agreement should strengthen GM’s leadership in creating a secure and long-lasting North American EV supply chain.

Moreover, on November 17, 2022, GM and Vale Canada Limited, a division of Vale S.A. (VALE), announced the signing of a term sheet for the long-term supply of battery-grade nickel sulfate from VALE’s proposed Bécancour, Quebec, Canada factory. This agreement is expected to help GM meet its rapidly increasing EV production requirement in North America.

In terms of forward non-GAAP P/E, GM is currently trading at 5.00x, 64.2% lower than the industry average of 13.94x. The stock’s forward EV/Sales of 0.94x is 20.7% lower than the industry average of 1.19x. Also, its forward EV/EBITDA of 5.64x compares with the 9.79x industry average.

For the third quarter that ended September 30, 2022, GM’s revenue increased 56.4% year-over-year to $41.89 billion. Its net income attributable to stockholders grew 36.6% from the year-ago value to $3.31 billion. Also, the company’s adjusted EBIT increased 46.7% from the prior year’s period to $4.29 billion, and its adjusted EPS stood at $2.25, up 48% year-over-year.

GM pays

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2 Auto Stocks to Buy Now and 2 to Avoid at All Costs

The automotive industry has faced rapid changes in its operations in the modern world. The auto industry in 2023 is expected to be shaped by factors like increased integration of digital technology, the emergence of fuel cell electric vehicles (EVs), and self-driving vehicles.

Automobile manufacturers are moving increasingly towards clean energy and sustainable technologies. In the first half of 2022, global EV sales were up 62% year-over-year. Moreover, the global EV market is expected to surpass $980 billion by 2028, growing at a CAGR of 24.5% between 2022 to 2028.

Given this backdrop, fundamentally strong auto stocks General Motors Company (GM) and Honda Motor Co., Ltd. (HMC) might be solid buys now.

However, given the multi-decade-high inflation, interest rate hikes by the Fed, and geopolitical turmoil, fundamentally weak stocks XPeng Inc. (XPEV) and Mullen Automotive, Inc. (MULN) could be best avoided.

Stocks to Buy:

General Motors Company (GM)

GM designs, builds, and sells trucks, crossovers, cars, automobile parts, and accessories in several parts of the world. Its segments are GM North America; GM International; Cruise; and GM Financial.

On November 17, GM and Vale Canada Limited, a subsidiary of Vale S.A. (VALE), announced the signing of a term sheet for the long-term supply of battery-grade nickel sulfate from VALE’s proposed plant at Bécancour, Québec. Securing the supply of the material is expected to support GM’s EV production needs in North America.

On October 24, GM declared a $0.09 per share cash dividend for the fourth quarter of 2022, payable to common stockholders on Thursday, December 15, 2022. This reflects the shareholder return ability of the company.

GM’s revenue came in at $41.89 billion for the third quarter ended September 30, up 56.4% year-over-year. Its adjusted EBIT came in at $4.29 billion, up 46.7% from the prior-year period. In addition, its adjusted EPS came in at $2.25, up 48% year-over-year.

Analysts expect GM’s EPS for the fiscal fourth quarter ending December 2022 to increase 23.7% year-over-year to $1.67. Its revenue is expected to increase 21.6% year-over-year to $40.84 billion in the same quarter. Additionally, GM has surpassed EPS estimates in three of the four trailing quarters, which is impressive.

GM has gained 11.6% over the past six months to close the last trading session at $39.52. However, it has gained 12.9% in the past month.

GM’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

GM has an A grade for Growth and a B for Value and Sentiment. Within the Auto & Vehicle Manufacturers industry, GM is ranked #20 out of 70 stocks.

Click here for the additional POWR Ratings for GM (Momentum, Stability, and Quality).

Honda Motor Co., Ltd. (HMC)

HMC, headquartered in Tokyo, Japan, designs, manufactures, and sells motorcycles, automobiles, power, and other products.

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AutoZone and 3 Other Auto Parts Stocks That Look Like Buys

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Morgan Stanley recently upgraded AutoZone, citing its ability to pass on higher prices to consumers.


Andrea Morales/Bloomberg

Auto parts retailers have outpaced the market for much of the pandemic. Current economic uncertainty should keep the group in the fast lane.

The share price of one such retailer,

AutoZone

(ticker: AZO), is up 1% this year. The stocks of

Advance Auto Parts

(AAP),

O’Reilly Automotive

(ORLY), as well as NAPA Auto Parts owner

Genuine Parts

(GPC) are all in the red in 2022. But with the exception of Advance Auto, they have held their ground better than the S&P 500, which is down about 20%.

Auto parts retailers have a reputation as defensive stocks—after all, car repairs can only be delayed so long, even during a downturn. There are reasons to think the stocks can keep outperforming.

“When you can buy these stocks at these prices, there’s an asymmetrical risk/return,” says Max Wasserman, founder of Miramar Capital, which owns shares of Advance Auto Parts and Genuine Parts. ”Yes, they could go down a little further, but the upside is much higher.”

Having a running car remains essential for most Americans. That gives them the incentive to keep repairing their cars, even as the vehicle fleet ages. The average car is more than 12 years old, according to S&P Global Mobility. Genuine Parts has estimated older models tend to require $800 a year in maintenance.

That is unlikely to change anytime soon. Consumers tend to delay big-ticket purchases like cars when they’re less confident about the economy, while the average price of a new car surged to $47,000 from $38,000 during the pandemic as chip shortages crimped vehicle output. Used cars hit record prices, putting them out of reach for many.

Company / Ticker Recent Price YTD Change 12-Mo. Forward P/E 2022E EPS Growth** Market Value (bil)
Advance Auto Parts / AAP $178.75 -25% 12.8 14% $10.8
AutoZone / AZO* 2,125.33 1 17.5 21 41.4
Genuine Parts / GPC 135.45 -3 17.0 13 19.2
O’Reilly Automotive / ORLY 630.52 -11 18.4 6 41.4

*Fiscal year ends in August **Year over year

Source: FactSet

The 2007-09 recession underscored the resilience of auto parts stores. The overall stock market fell roughly in half, but with the exception of Genuine Parts, auto parts retailers were largely unscathed. Shares of AutoZone and Advance Auto held their value during the downturn, while O’Reilly stock lost just 10%.

“While consumer spending in the auto parts segment did decline during the Great Financial Crisis, it declined less than overall durable goods and recovered faster” than both durable goods and overall personal consumption, notes Morgan Stanley analyst Simeon Gutman.

Nor is the specter of electric vehicles—which tend to be trickier for do-it-yourself repairs—a worry for auto parts retailers, analysts say. EVs and hybrids combined accounted for about 10% of U.S. auto sales last year, while less than 1% of cars on U.S. roads are electric.

“Absolutely EVs will proliferate; it’s not a silly argument, but it’s going to

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These 2 Auto Provide Stocks Could Reward From Inflation — Here’s How

If you have shopped for a new motor vehicle lately, you have probably experienced a a lot various practical experience than in prior several years. The times of haggling to a rate significantly decrease than the manufacturer’s suggested retail price tag (MSRP) are extensive absent, and buyers are alternatively paying out perfectly about the sticker price tag in most conditions. In accordance to NBC Information, 82% of purchasers paid more than $700 previously mentioned the MSRP in January.

With this in mind, numerous Individuals will most likely be keeping on to their latest vehicles extended, and this could appreciably reward retail areas suppliers like AutoZone ( AZO 3.40% ) and O’Reilly Automotive ( ORLY 2.95% )

Why are costs mounting?

The inflation fee in the U.S. arrived at 7.5% in January 2022, the maximum it has been in 40 many years as measured by the consumer rate index (CPI). There are various motives for this prevalence. A single is that COVID-19 has crimped the supply chain, and the modern omicron variant has exacerbated these issues. Whilst the variant appears to be fading quickly, the source chain will just take for a longer period to sleek out.

Graphic resource: Getty Visuals.

The auto business has been significantly hit by a extreme lack of semiconductor chips that autos have to have to make everything from heated seats to navigation systems do the job. In accordance to The Alliance for Auto Innovation, the chip scarcity could result in over a million much less motor vehicles to be created in the U.S. this calendar year.

The shortage of new autos also has a trickle-down impact on made use of cars. Fewer trade-ins for new cars also decreases the provide of utilised motor vehicles, and charges increase in both equally marketplaces. As demonstrated underneath, the CPI for new autos and vans has skyrocketed recently. 

US Consumer Price Index: New Cars and Trucks Chart

US Purchaser Price Index: New Autos and Trucks facts by YCharts

Even though automakers operate to enhance manufacturing to meet desire, several buyers will be priced out of the industry and want sections for their present motor vehicles. That is wherever AutoZone and O’Reilly can make hay.

AutoZone

AutoZone stock has fallen just about 15% 12 months to date nevertheless, it is up more than 50% about the earlier 12 months. The organization is a retailer of automobile substitute pieces and add-ons. Net income for fiscal 2021 achieved $14.6 billion. This is up 16% more than fiscal 2020. Gross income also rose from $6.8 billion in 2020 to $7.7 billion in 2021. More importantly, its gross margin remained powerful at virtually 53% vs. 54% in 2020. This implies that the firm has productively passed alongside the improves in selling prices to people or suppliers and retained its profitability.

Diluted earnings for every share (EPS) arrived in at $95.19 in fiscal 2021, a 32% raise around fiscal 2020. Part of this advancement is attributable to the company’s generous share-buyback plan. For fiscal 2021, the company repurchased $3.4 billion of its common

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3 Under-the-Radar Vehicle Technologies Stocks to Enjoy in 2022

With the internal combustion engine no for a longer time the sole selection for energy, the auto is currently being entirely reimagined. Dozens of electric powered car or truck maker start out-ups have appeared to capitalize on this coming sea adjust. But a slew of new vehicle pieces manufacturers and service companies are also showing to assist satisfy the have to have for automotive technology, and quite a few of them could be even more rewarding investments than the automakers them selves.

Two compact car tech companies that buyers should really maintain an eye on are Luminar Technologies (NASDAQ:LAZR) and Ambarella (NASDAQ:AMBA). In addition, tech giant Qualcomm (NASDAQ:QCOM) has been quietly building its presence in the automotive space, and appears to be like like a fantastic buy suitable now.

Impression source: Getty Illustrations or photos.

Luminar Technologies: Crawling towards a viable car or truck autonomy small business

Lidar technological know-how professional Luminar was off to the races subsequent its IPO in late 2020, but the inventory put in much of 2021 in steady drop as investors’ abnormal early optimism little by little wore off. Lidar (which stands for “mild detection and ranging”) uses lasers to support a car “see” what is actually close to it, and could feature prominently in the units that at some point allow for thoroughly self-driving cars. But for now, Luminar is a start out-up which is operating tricky to build its wares and protected specials with automobile suppliers.

The financials convey to the story proper now. In the 3rd quarter of 2021, Luminar’s earnings was a mere $8 million, and it booked an altered internet reduction of $36 million. On its balance sheet, the company had $129 million in funds and yet another $416 million in shorter-expression investments, so it has a couple of years’ well worth of liquidity to protect its losses as it tries to produce into a feasible business. But at this stage, valued at a current market cap of $5.8 billion, Luminar is a large-chance financial investment.  

So why maintain tabs on Luminar? Even though I’m personally not completely ready to invest in the stock however, the organization is creating speedy development as automakers begin to include lidar know-how into their sophisticated driver support programs (ADAS). Income very last quarter was up 89% yr about calendar year. And it was not long ago declared that Nvidia (NASDAQ:NVDA) had chosen Luminar’s lidar sensors to go into the Nvidia Generate Hyperion autonomous car system, an integrated computer and sensor suite that automakers can use to supply their automobiles with self-driving capabilities. Drive Hyperion will go into production for 2024 design yr autos.

Hence, Luminar is on a crystal clear route to turning out to be a viable vehicle provider organization above the upcoming few of decades. Traders will want to physical exercise some tolerance listed here, as a good deal of buzz is still priced into the inventory. Even so, this modest business holds a good deal of assure if it can

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