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How Did Auto Parts Companies’ Stocks Fare in August?

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Optimism continued in August

O’Reilly Automotive (ORLY) stock has risen 8.5% on a month-to-date basis through August 28. Its peers AutoZone (AZO) and Advance Auto Parts (AAP) also traded on a positive note.

While AZO stock has risen ~8.6%, AAP has risen the most—about 14.8% month-to-date. During the same period, the S&P 500 benchmark has gained only 2.9%.

In 2018 so far, ORLY and AAP have registered a solid recovery. In August, AZO also entered positive territory. AAP, AZO, and ORLY have gained 62.6%, 38.0%, and 7.7%, respectively, YTD (year-to-date).

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Recent fundamentals

In 2017, these companies struggled with their softening sales growth rate, which took a toll on auto parts sellers’ stock prices. Despite a recovery toward the end of 2017, the stocks of these auto parts companies ended the year in negative territory.

AutoZone, O’Reilly, and Advance Auto Parts lost about 9.9%, 13.6%, and 41.1%, respectively, last year. Meanwhile, automakers (XLY) General Motors (GM) and Fiat Chrysler (FCAU) rose 17.7% and 96.4%, respectively, in 2017.

The auto parts industry’s outlook is dependent on weather, as a harsh winter season increases vehicle wear and tear and boosts the demand for auto parts. As with automakers, steep tariffs could affect auto parts sellers’ business by hurting their profitability.

In the final part of this series, we’ll see what analysts are recommending for these auto parts retailers in August.

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