After a plunge in consumer spending in December, retail sales bounced back strongly in January. A 3.8% increase in retail sales beat the 2.1% Dow Jones estimate. Consumer spending in January was propelled by receding omicron worries and a post-holiday season surge in demand.

Despite multi-decade high inflation, consumer spending has not slowed due to massive savings, rising employment, and increased household wealth. Even after recording low sales in January, retail sales were driven by rising automobile purchases. Motor vehicle and parts dealers saw a 5.7% rise in sales last month. Sal Guatieri, Senior Economist at BMO Capital Markets, said, “The strong rebound in January retail sales, though partly in response to last year’s weak finish and inflated by higher prices, suggests consumers still have plenty in the tank to propel the expansion forward this year.”

So, given this backdrop, we think it could be wise to add fundamentally strong auto parts stocks O'Reilly Automotive, Inc. (ORLY), AutoZone, Inc. (AZO), Magna International Inc. (MGA), Genuine Parts Company (GPC), and LKQ Corporation (LKQ) to one’s portfolio.

O'Reilly Automotive, Inc. (ORLY)

ORLY is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories. The Springfield, Miss.-based company sells its products to both DIY and professional service provider customers. Its product line includes new and remanufactured complex automotive parts, such as alternators, starters, fuel pumps, and water pumps.

ORLY’s sales increased 16.3% year-over-year to $3.29 billion for the fourth quarter. ended Dec. 31, 2021. The company’s net income increased 32% year-over-year to $518.97 million. Also, its EPS came in at $7.64, up 41.4% year-over-year.

Analysts expect ORLY’s EPS and revenue for the quarter ending June 30, 2022, to increase 9% and 15.6% respectively year-over-year to $9.08 and $3.73 billion.  It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 47.6% in price to close the last trading session at $676.96.

ORLY’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

It has an A grade for Sentiment and Quality. It is ranked #4 of 66 stocks in the Auto Parts industry. Click here to see the other ratings of ORLY for Growth, Value, Momentum, and Stability.

AutoZone, Inc. (AZO)

AZO is a Memphis, Tenn.-based retailer and distributor of automotive replacement parts and accessories. The company operates through the Auto Parts Locations segment. Its stores carry product lines for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive complex parts, maintenance items, accessories, and non-automotive products.

On Dec. 15, 2021, AZO announced that its board of directors had authorized the repurchase of an additional $1.50 billion of its common stock as part of its ongoing share repurchase program. AZO’s CFO and Executive VP–Finance and Store Development, Jamere Jackson, said, “AutoZone’s continued strong financial performance allows us to grow our business, return meaningful amounts of cash to our shareholders and maintain our investment-grade credit ratings.”

For its fiscal first quarter, ended Nov. 20, 2021, AZO’s net sales increased 16.3% year-over-year to $3.66 billion. The company’s net profit increased 25.5% year-over-year to $555.23 million. In addition, its EPS was $25.69, representing an increase of 38% year-over-year.

For the quarter ending Feb. 28, 2022, AZO’s EPS is expected to increase 19% year-over-year to $17.76. Its revenue for its fiscal 2023 is expected to increase 4.7% year-over-year to $16.01 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 58.5% in price to close the last trading session at $1,920.01.

AZO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

It has an A grade for Quality and a B grade for Sentiment. It is ranked #9 in the Auto Parts industry. To see the other ratings of AZO for Growth, Value, Momentum, and Stability, click here.

Magna International Inc. (MGA)

Headquartered in Aurora, Canada, MGA is a global automotive supplier with vehicle engineering and contract manufacturing operations and product capabilities, including body, chassis, exterior, seating, powertrain, and electronics mechatronics. It also has electronic and software capabilities.

On Jan. 11, 2022, MGA announced that it had acquired Optimus Ride’s technology, IP, and assets. MGA hired more than 120 Optimus Ride employees. Through the acquisition, MGA seeks to strengthen its advanced driver assistance systems, which are in high demand. Magna Electronics’ President John O’Hara said, “Growing our engineering bench strength in sensing hardware and software helps accelerate our path forward in a rapidly growing ADAS market.”

MGA’s sales for the fiscal year, ended Dec. 31, 2021, increased 11% year-over-year to $36.24 billion. The company’s adjusted EBIT increased 23.1% year-over-year to $2.06 billion. Also, its adjusted EPS came in at $5.13, up 29.8% year-over-year.

Analysts expect MGA’s EPS and revenue for its fiscal 2021 to increase 73.2% and 19.4%, respectively, to $6.84 and $38.98 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 2.6% in price to close the last trading session at $77.42.

MGA’s POWR Ratings reflect this promising outlook. It has a B grade for Value. In the Auto Parts industry, it is ranked #28. To see the additional ratings of MGA for Growth, Momentum, Stability, Sentiment, and Quality, click here.

Genuine Parts Company (GPC)

GPC in Atlanta, Ga., is a service company that distributes automotive and industrial replacement parts. It operates in the Automotive Parts and Industrial Parts segments. The Automotive Parts segment distributes replacement parts for automobiles, trucks, and other vehicles. Its Industrial Parts segment distributes mechanical and fluid power transmission equipment for various industrial bearings.

On Jan. 4, 2022, GPC announced the acquisition of Kaman Distribution Group. KDG is a leading power transmission, automation, and fluid power industrial distributor and solutions provider. Chairman and CEO of GPC, Paul Donahue, said, “We are delighted to announce the completion of this strategic acquisition, creating significant opportunities for our customers, suppliers, teammates, and shareholders.”

For the fiscal fourth quarter, ended Dec. 31, 2021, GPC’s sales increased 12.9% year-over-year to $4.80 billion. The company’s adjusted net income increased 15.9% year-over-year to $256.22 million. Also, its adjusted EPS came in at $1.79, up 17.7% year-over-year.

For the quarter ending June 30, 2022, GPC’s EPS is expected to increase 11.5% year-over-year to $1.94. Its revenue for the quarter ending March 31, 2022, increased 12.5% year-over-year to $5.02 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 25.5% in price to close the last trading session at $126.86.

GPC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.

It has a B grade for Stability, Sentiment, and Quality. Within the Auto Parts industry, it is ranked first out of 66 stocks. To see the other ratings of GPC for Growth, Value, and Momentum, click here.

LKQ Corporation (LKQ)

LKQ is a holding company that distributes vehicle products, including replacement parts, components, and systems used to repair and maintain vehicles, specialty vehicle products and accessories, and automotive glass products. Its segments include Wholesale-North America, Europe, and Specialty. LKQ is headquartered in Chicago.

LKQ’s revenue increased 7.8% year-over-year to $3.18 billion for the fourth quarter, ended Dec. 31, 2021. The company’s adjusted net income increased 19.9% year-over-year to $253.85 million. In addition, its adjusted EPS was $0.87, representing 26% year-over-year.

Analysts expect LKQ’s EPS and revenue for the quarter ending March 31, 2022, to increase 5.3% and 3.3%, respectively, year-over-year to $0.99 and $3.29 billion. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 27.3% in price to close the last trading session at $49.17.

LKQ’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

It has a B grade for Quality. It is ranked #6 in the Auto Parts industry. Click here to see the additional ratings of LKQ for Growth, Value, Momentum, Stability, and Sentiment.

ORLY shares were unchanged in premarket trading Tuesday. Year-to-date, ORLY has declined -4.14%, versus a -8.74% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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