3 Stocks to Watch From Auto Parts Retail Industry With Promising Prospects

Lavina Shahu

Mon, Apr 28, 2025, 8:25 AM 6 min read

The Zacks Automotive - Retail and Wholesale - Partsindustry is set to benefit from the rising average age of the vehicles that require frequent servicing and replacement of auto parts.Players like AutoZone, Inc. AZO, Genuine Parts Company GPC and Advance Auto Parts, Inc. AAP are entering into new markets through strategic acquisitions and expansion of mega hubs to grow their market share and are investing in digital platforms to reach a broader audience, driving higher profitability.

Industry Overview

The Zacks Automotive – Retail and Wholesale – Parts industry participants engage in various activities, including the retail, distribution and installation of vehicle components, equipment and accessories. These offerings include seat covers, antifreeze, engine additives, wiper blades, batteries, brake system parts, belts, chassis components, driveline parts, engine components and fuel pumps. Customers can choose between repairing their vehicles independently within the DIY market or relying on professional services through the do-it-for-me segment. The industry remains fiercely competitive and is undergoing transformative shifts driven by changing customer preferences and technological advancements.

Factors Influencing the Industry Outlook

Demand for Parts Replacement in Aging Vehicles: Over the last 10 years, the average age of vehicles on U.S. roads has risen from 11.1 years to 12.6 years. As cars grow older, they require more frequent servicing and replacement of components. This aging trend has prompted consumers to spend more on essential repairs and part replacements to maintain the functionality of their vehicles, thereby contributing to increased demand for auto parts.

Expansion Efforts: Auto part dealers are entering into new markets through strategic acquisitions and expansion of mega hubs, which are helping them grow their market share and strengthen their offerings. Additionally, investing in digital platforms aligns with shifting consumer preferences toward online transactions. This digital strategy is enabling dealers to reach a broader audience, ultimately driving higher profitability and expanding their market footprint.

Rising Capex to Impact Cash Flows:The auto part retailers are increasing their capital expenditure to support business growth, improve the electronic catalog, expand new stores and enhance their supply chain and merchandising projects for better inventory availability. Investments will also address store and technology updates and increased focus on essential maintenance. These increased investments might limit their near-term cash flows.

Zacks Industry Rank Indicates Bright Near-Term Prospects

The Zacks Auto Retail & Wholesale Parts industry is within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #95, which places it in the top 39% of around 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates tepid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are getting optimistic about this group’s earnings growth potential.

Before we present a few stocks that could still be on your watchlist, let’s take a look at the industry’s shareholder returns and current valuation first.

Industry Tops S&P 500 & Sector

The Zacks Auto Retail and Wholesale Parts industry has outperformed the Auto, Tires and Truck sector and the Zacks S&P 500 composite over the past year. The industry has soared 10.3% over this period compared with S&P 500’s growth of 8.3%. The sector declined 4.9% in the same time frame.