Zacks Industry Outlook Dorman Products and Standard Motor Products

For Immediate ReleaseChicago, IL – December 30, 2024 – Today, Zacks Equity Research Dorman Products DORM and Standard Motor Products SMP.2 Stocks to Watch From the Promising Auto Replacement Parts Industry Industry: Automotive – Replacement PartsLink to article: https://www.zacks.com/commentary/2388598/2-stocks-to-watch-from-the-promising-auto-replacement-parts-industryThe aging vehicle fleet continues to drive growth for the Zacks Automotive Replacement Parts industry as consumers focus on replacing faulty components to keep older cars functional. The increasing complexity of modern, tech-driven vehicles further expands opportunities for the sector. Additionally, high interest rates and affordability concerns are encouraging repairs over new vehicle purchases, boosting demand. The industry’s valuation is also attractive compared to the sector and the S&P 500.  Industry players like Dorman Products and Standard Motor Products stand out, supported by strategic acquisitions and shareholder-focused initiatives.Industry OverviewThe Zacks Automotive - Replacement Parts industry comprises companies that engage in the production, marketing and distribution of replacement components for the automotive aftermarket. The industry players offer replacement systems, components, equipment and parts to repair as well as accessorize vehicles. Some important auto replacement components are engine, steering, drive axle, suspension, brakes and gearbox parts. The auto replacement market is somewhat less exposed to business downturns as consumers are more inclined to spend on replacement parts to maintain their vehicles rather than splurge on new ones. Consumers can either opt for repairing vehicles on their own or can avail professional services for the same. The industry is undergoing a radical change, with evolving customer expectations and technological innovation acting as game changers.Key Investing ThemesIncreasing Longevity of Vehicles: In 2024, the average age of vehicles in the United States hit an all-time high of 12.6 years, marking seven consecutive years of growth. Older vehicles typically need more frequent repairs and maintenance, driving demand for automotive replacement parts and services. This aging fleet has become a significant growth catalyst, as keeping older cars safe and functional requires continuous spending, creating opportunities for companies in the replacement parts industry.Technology Opening Up New Avenues: The automotive industry's shift toward electrification, autonomy, and digitization is transforming the replacement parts market. Modern vehicles require advanced components like sensors, electronic systems, and software-driven parts. This shift has increased the need for skilled technicians and advanced diagnostic tools, reshaping aftermarket dynamics and creating new growth opportunities within the auto replacement parts industry.Affordability Issues to Drive Repairs: Affordability challenges are expected to persist in 2025, with inflation remaining elevated and interest rates declining more gradually than anticipated, as indicated by Fed Chair Jerome Powell's cautious outlook. Additionally, proposed tariffs under the Trump administration could push vehicle prices higher. These factors may encourage vehicle owners to opt for repairs over purchasing new cars, driving increased demand for replacement parts.Favorable Zacks Industry RankThe Zacks Automotive – Replacements Parts industry is part of the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #29, which places it in the top 12% of around 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid 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.Before we present a couple of stocks from the industry worth considering for your portfolio, let's take a look at the industry’s stock market performance and current valuation.Industry Lags Sector and S&P 500The Zacks Automotive – Replacement Parts industry has underperformed both the Auto, Tires and Truck sector and S&P 500 composite over the past year. The industry has declined 17% against the S&P 500 and sector’s growth of 27% and 29%, respectively.Industry's Current ValuationSince automotive companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. On the basis of trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 8.8X compared with the S&P 500’s 18.84X and the sector’s trailing 12-month EV/EBITDA of 22.78X. Over the past five years, the industry has traded as high as 12.47X, as low as 6.89X and at a median of 10.42X.2 Stocks in FocusDorman Products: It is a key player in the motor vehicle aftermarket industry, focusing on replacement and upgrade parts. The company has been consistently broadening its product offerings, adding hundreds of new direct replacement parts and assemblies designed to meet or exceed original equipment performance. The acquisition of Super ATV has bolstered the company's overall prospects, supported by a strong balance sheet, a debt-to-capitalization ratio of 28% (compared to the industry average of 56%) and ample liquidity. Investor-friendly moves via share buybacks further instill confidence. DORM currently sports a Zacks Rank #1 (Strong Buy) and a Value Score of B.The company surpassed earnings estimates in each of the trailing four quarters, the average surprise being 35%. The Zacks Consensus Estimate for Dorman’s 2025 sales and earnings implies year-over-year growth of 4% and 9%, respectively. The consensus mark for 2025 EPS has moved north by 88 cents over the past 60 days.You can see the complete list of today’s Zacks #1 Rank stocks here.Standard Motors: It is one of the leading manufacturers and distributors of premium automotive replacement parts for engine management and temperature control systems.The acquisition of Nissens will help SMP expand its geographic presence, establish a significant global growth platform and improve cost savings efforts. Expansionary initiatives will offer the firm increased capacity to support future growth, reduce risk through a multi-point distribution strategy and enhance product delivery times in specific geographical areas. Standard Motor’s long-term debt-to-capital ratio of 0.17 is lower than the industry’s 0.37. The company repurchased $10.4 million of shares in the first nine months of 2024.SMP surpassed earnings estimates in three of the trailing four quarters and missed on the other, the average surprise being 3.8%. The Zacks Consensus Estimate for Standard Motors’ 2025 sales and earnings implies year-over-year growth of 2.3% and 11.3%, respectively. The stock currently carries a Zacks Rank #3 (Hold) and has a Value Score of A.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance  for information about the performance numbers displayed in this press release.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Standard Motor Products, Inc. (SMP): Free Stock Analysis Report Dorman Products, Inc. (DORM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks