Auto Parts Retailers Underperform the Market in February



Auto parts retailers’ stocks

O’Reilly Automotive (ORLY), Advance Auto Parts (AAP), and AutoZone (AZO) are the three largest auto parts retailers in the US market. The stocks of these three auto parts retailers have all touched record highs in the last three years.

In 2017, these companies largely struggled with softening sales growth. Lower sales growth took a toll on auto parts retailers’ stocks in the first three quarters of the year. In February 2018, these stocks have seen sharp falls partly due to broader market weakness and a weak industry outlook for 2018. Let’s take a closer look.

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Underperforming the market

As of February 20, O’Reilly Automotive stock has fallen 4.7% on a month-to-date basis. In comparison, the stocks of AutoZone and Advance Auto Parts also are on similar paths and have fallen ~6.8% and 9.9% month-to-date, respectively. During the same period, the benchmark S&P 500 Index has fallen just 3.8%.

In 2018 so far, AZO, ORLY, and AAP are still trading in positive territory and have risen 0.3%, 4.9%, and 5.7%, respectively.

Will 2018 prove to be a good year?

Despite a recovery toward the end of 2017, the stocks of auto component companies ended the year in the negative. AZO, ORLY, and AAP fell ~9.9%, 13.6%, and 41.1%, respectively, last year. Meanwhile, automakers (XLY) such as General Motors (GM) and Fiat Chrysler Automobiles (FCAU) rose 17.7% and 96.4%, respectively, in 2017.

In 2018, the industry outlook will be highly dependent on the winter season. A harsh winter season increases demand for auto parts due to high wear and tear.

Next, we’ll find out what analysts are recommending for these auto parts retailers in February 2018.


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