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Analysts Are Positive on Auto Parts Companies in February 2018

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Auto parts retailers’ stocks

According to Reuters data, as of February 20, 2018, ~42%, 68%, and 46% of analysts have given “buy” recommendations to AutoZone (AZO), O’Reilly Automotive (ORLY), and Advance Auto Parts (AAP), respectively.

Another 42% and 32% of analysts have recommended “holds” on AAP stock and O’Reilly stock, respectively. A total of 54% of analysts have recommended “holds” on AZO stock.

Interestingly, no analysts covering ORLY have given it “sell” recommendations, while 4% and 12% of analysts have recommended “sells” on AZO and AAP, respectively.

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Upside potential in 2018

As of February 20, auto parts sellers’ (FXD) 12-month target prices and upside potentials were as follows:

  • AutoZone stock was trading at $713.23, and analysts gave it a target of $809.90, which reflected an upside potential of ~13.6%. Notably, analysts’ consensus target price for AZO has risen to $809.90 from $644.91 about three months ago.
  • Analysts’ consensus target price for O’Reilly Automotive was $291.61, ~15.5% higher than its market price of $252.38. In January 2017, analysts’ consensus target price for ORLY was much lower at $276.83.
  • Advance Auto Parts had a price target of $115.63, ~9.8% higher than its market price of $105.35.

Earnings updates

O’Reilly Automotive released its 4Q17 earnings on February 8. Its earnings rose 12% YoY (year-over-year) and beat analysts’ estimates. The company’s gross margin remained nearly flat YoY at 52.9% in 4Q17.

Note that auto parts sellers’ operating profit margins are typically higher than those of legacy automakers such as General Motors (GM) and Ford Motor Company (F).

AutoZone is expected to release its latest quarterly earnings on February 27, 2018.

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