Quantcast
Jump to content
  • Welcome to Auto Parts Forum

    Whether you are a veteran automotive parts guru or just someone looking for some quick auto parts advice, register today and start a new topic in our forum. Registration is free and you can even sign up with social network platforms such as Facebook, Twitter, Google, and LinkedIn. 

     

partsman

Cramer: Auto parts stocks like O'Reilly wrongly sold off and are buys

Recommended Posts

  • "Mad Money" host Jim Cramer tracked the recent weakness in three auto parts stocks and argued that the market overreacted to their shortfalls.
  • O'Reilly Automotive, Advance Auto Parts and AutoZone all sold off earlier this year on worries that Amazon would disrupt their industry.
  • But after a recent wave of positive earnings results, Cramer said the stocks could be picking up speed.

The midwinter bounce in auto parts stocks O'Reilly Automotive, Advance Auto Parts and AutoZone did not go unnoticed by CNBC's Jim Cramer.

"First AutoZone and O'Reilly bounced from their lows over the summer, then Advance Auto Parts seemed to bottom last month. It's now up 28 percent from its lows on Nov. 8," the "Mad Money" host said. "That's a magnificent move. More important, if the auto parts business is really back on track, then these stocks are dirt-cheap in a market where we're constantly hearing people fretting about sky-high valuations."

All three stocks served shareholders well from 2013 to 2016, when people were less eager to buy new cars following the financial crisis and, as a result, had to replace car parts more often.

But starting in 2017, all three fell off a cliff. The proximate cause? Amazon's rumored foray  into the auto parts industry.

In late January, Wall Street started buzzing about the e-commerce giant's potential disruption in auto parts, and shares of O'Reilly, Advance Auto and Autozone all got slammed.

Shortly after, auto parts retailers started issuing dismal earnings reports. Even though the weakness had nothing to do with Amazon, it looked bad given the worries about potential competition.

In February, Advance Auto and AutoZone both reported shortfalls. O'Reilly's results, usually the strongest of the three, still beat estimates.

By spring, all three were struggling: Advance Auto's earnings missed expectations by far, with same-store sales were down 2.7 percent; AutoZone reported a gigantic miss; and O'Reilly disappointed analysts despite giving decent guidance.

"So what caused these hideous numbers? The one thing that all three companies kept citing as an alibi for their poor performance was the very mild winter, [the] second mild one in a row," Cramer said.

Cold winters tend to raise the need for car maintenance and part replacement, so mild winters result in less overall demand for replacement car parts.

Last year's mild winter also resulted in dramatic sell-offs for the car parts plays. Advance Auto slid from $169 a share at the beginning of 2017 to $78 a share when it bottomed a month ago; AutoZone fell from $789 to $491 at its July lows; O'Reilly tumbled from $278 to $169.

But come fall, all three stocks started gaining strength. Advance Auto gave Wall Street a big earnings beat and re-affirmed its full-year guidance; AutoZone delivered a strong quarter; and O'Reilly beat estimates and raised its full-year forecast.

"I think the market may have overreacted in the first half when these companies reported a wave of shortfalls and everyone was freaking out about 'Death Star' Amazon," Cramer said.

"I've even recommended Advance Auto Parts as a takeover target at the Deal Economy conference a couple weeks ago because Jeff Smith, who runs Starboard Value, the activist fund, is Advance Auto's chairman. I bet he'd love to get [a deal] out of this one," he added.

And all three stocks are still fairly cheap, Cramer said: Advance Auto trades at 17 times next year's earnings estimates, AutoZone at 14 times and O'Reilly at 19 times.

"The sell-off was a total rush to judgment," the "Mad Money" host concluded. "Which one should you buy? ... You can take your pick. You can buy best of breed, that's O'Reilly. You can bargain-hunt with AutoZone or you can speculate on a takeout with Advance Auto Parts. Boy, this industry, it's got something for everybody."

WATCH: Cramer drills down on the auto parts stocks

link hidden, please login to view
link hidden, please login to view

 

 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Similar Topics

    • By Auto News
      link hidden, please login to view
    • By Alex
      First Brands Group, a global automotive parts manufacturer, has acquired Brake Parts Inc (BPI), which manufactures and markets brake products including the full line of Raybestos branded brake parts, and Champion Laboratories Inc., a full-line filtration manufacturer with LuberFiner as a leading brand. The acquisitions are effective immediately.
      First Brands Group, a global automotive parts manufacturer, has acquired Brake Parts Inc (BPI), which manufactures and markets brake products including the full line of Raybestos branded brake parts, and Champion Laboratories Inc., a full-line filtration manufacturer with LuberFiner as a leading brand.
      “We are excited to add Raybestos and Luberfiner comprehensive product lines to our market-leading portfolio of aftermarket brands,” said Guy Andrysick, chief marketing officer at First Brands Group. “Both Raybestos and LuberFiner are important and natural complements to our current vehicle maintenance and vehicle repair product solutions. We have strengthened our supplier position to support all customers with one of the most comprehensive portfolios of replacement products in the North American automotive aftermarket.”
      The acquisitions are effective immediately. 
      Source: 
      link hidden, please login to view
  • Our picks

    • Advance Auto Parts To Sponsor NASCAR Weekly Series In Multiyear Agreement
      DAYTONA BEACH, Fla. & RALEIGH, N.C.--(BUSINESS WIRE)--As NASCAR Weekly Series sanctioned events begin to return at select tracks across North America, NASCAR and Advance Auto Parts (NYSE: AAP), a leading automotive aftermarket parts provider, today announced a multiyear official partnership, designating Advance as the series entitlement sponsor. As part of the agreement, Advance also becomes the “Official Auto Parts Retailer of NASCAR.”

      "It's great to have Advance join us in welcoming the return of NASCAR-sanctioned grassroots racing," said Ben Kennedy, vice president, racing development, NASCAR. "Advance’s commitment to our Weekly Series will develop some of the brightest NASCAR talent across North America. Advance has a long history in racing, and we’re thrilled to see its expanded presence from the grassroots all the way through our national series.”
      • 0 replies
    • Advance Auto Parts Announces Purchase of the DieHard Brand from Transformco
      Advance Auto Parts, Inc. (NYSE: AAP) has acquired the DieHard brand from Transform Holdco LLC (“Transformco”), for $200 million utilizing cash on hand.

      “We are excited to acquire global ownership of an iconic American brand. DieHard will help differentiate Advance, drive increased DIY customer traffic and build a unique value proposition for our Professional customers and Independent Carquest partners. DieHard has the highest brand awareness and regard of any automotive battery brand in North America and will enable Advance to build a leadership position within the critical battery category,” said Tom Greco, president and CEO, Advance Auto Parts. “DieHard stands for durability and reliability and we will strengthen and leverage the brand in other battery categories, such as marine and recreational vehicles. We also see opportunities to extend DieHard in other automotive categories. We remain committed to providing our customers with high-quality products and excellent service. The addition of DieHard to our industry leading assortment of national brands, OE parts and owned brands will enable us to differentiate Advance and drive significant long-term shareholder value.”
      • 0 replies
    • AmazonBasics 6-Pack High Mileage Motor Oil - Synthetic Blend
      AmazonBasics High Mileage Motor Oil - Synthetic Blend

      AmazonBasics high-mileage synthetic-blend motor oil offers an enhanced level of protection for engines over 75,000 miles. Its synthetic blend combines conventional oil with synthetic for cost efficiency with some of the benefits of a full synthetic. An important part of routine maintenance, the motor oil works well for anything from topping off levels to complete oil changes. Whether it’s a beloved older vehicle or one with an uncertain maintenance history, help protect its engine with AmazonBasics high-mileage, synthetic-blend motor oil.
      • 3 replies
    • OEM vs. Aftermarket Parts for Your Car: How to Choose
      When selecting parts for a car repair, it pays to know the differences between original and aftermarket parts. Whenever possible, get estimates for both.

      Choosing between original and aftermarket car parts — and even used parts of either type — is all about squaring your priorities with your budget.

      You’ll have different options depending on the part and the shop. And the best choice will depend on whether you’re trying to keep repairs cheap, restore your car’s appearance after a wreck or soup up your ride.

      Original equipment manufacturer (OEM) parts match those that came with your car, and are of the same quality as its original parts. They’re also the most expensive.
        • Like
      • 1 reply
    • Replacement Intervals For Oil And Air Filters In Today’s Vehicles
      The factory-recommended replacement intervals for filters can vary quite a bit depending on the year, make and model of the vehicle, as well as how it is driven. As a rule, older vehicles (those more than 15 to 20 years old) typically have more frequent service intervals than newer vehicles. Why? Because late-model vehicles require less maintenance, thanks to improvements in motor oils, transmission fluids, engine design and filter media.

      Many long-life air and oil filters use synthetic fiber media or a blend of cellulose and synthetic fibers to extend filter life.

      Changing the oil and filter every 3,000 miles was standard practice decades ago. But it’s no longer necessary because most multi-viscosity oils today are a synthetic blend or a full synthetic that resist viscosity breakdown and oxidation for a much longer period of time. Late-model fuel-injected engines also run much cleaner than their carbureted ancestors, which reduces oil contamination in the crankcase.
        • Like
      • 0 replies
×
×
  • Create New...

Copyright © 2020 AutoPartsForum Powered by Invision Community