4 Auto Parts Stocks Riding the Positive Manufacturing Wave - Analyst Blog

4 Auto Parts Stocks Riding the Positive Manufacturing Wave

After January's horrific weather across much of the U.S., many investors were looking for a big rebound in key data points for February. Fortunately, these numbers didn't disappoint, as the Federal Reserve released fresh data on manufacturing and industrial output which was viewed pretty positively by the market.

Among the highlights were the auto production numbers, as these rose by 4.6% in February, marking a big turnaround from the 5.1% drop in January.  Moreover, industrial production increased 0.6% in February, the largest increase since September 2013.  This positive news suggests strong catalysts for continued growth over the next several months for the often-overlooked Auto Parts Industry, and the Retail/Wholesale-Auto Parts Industry.

Auto/Truck Replacement Parts Industry

The Auto/Truck Replacement Parts Industry currently holds the Zacks #1 Industry Rank.  Of the eight stocks in this sub-industry, three are Zacks #1 (Strong Buy), two are Zacks Rank #2 (Buy), and three are Zacks Rank # 3 (Hold).  This indicates a very strong sub-industry with more than half showing strong earnings growth potential.

Stocks To Consider

Currently, there are three stocks that carry a Zacks #1 (Strong Buy) in the Auto/Truck Replacement Parts Industry:  Douglas Dynamics PLOW, Motorcar Parts America Inc. MPAA, and Remy International Inc. (REMY). 

Douglas Dynamics has seen its Zacks Consensus Estimate for 2014 rise from $0.82 to $0.95 just in the last week; which would be a 75.93% year over year earnings growth.  Moreover, PLOW, produced a 52% Positive Earnings Surprise in the previous quarter. 

Motorcar Parts America also saw its Zacks Consensus Estimate for 2014 increase from $1.24 to $1.37, which correlates to a 261.57% year over year earnings growth.  Over the past three quarters, MPAA has produced a 43.33% positive earnings surprise. 

Remy International, has also seen earnings estimates rise recently, going from $1.66 to $1.73, indicating a 24.46% year over year earnings growth.  Over the past four quarters, REMY has an average Positive Earnings Surprise of 30.85%

All three of these companies are riding the Auto Industry production wave, and they all have a solid history of beating earnings estimates for the past several quarters. 

Retail/Wholesale-Auto Parts Industry

The Retail/Wholesale-Auto Parts Industry (hyperlink page) also carries a Zacks #1 Industry Rank as well.  This sub-industry also benefited from the recent rebound by the Manufacturing and Industrial output.  Of the six companies in the sub-industry, one carries a Zack Rank #1 (Strong Buy), four have a Zacks Rank of #2 (Buy), and one company is a Zacks Ranks #3 (Hold). 

Stocks To Consider

Advanced Auto Parts Inc. AAP, is the lone Zacks Rank #1, for this sub-industry.  AAP has seen their earnings estimates rise from $7.01 to $7.50 in the past 60 days; which represents a 32.29% year over year earnings growth.  Furthermore, AAP has also posted four consecutive Positive Earnings Surprises, with an average positive surprise of 8.66%.

Other companies to consider in this segment include: Autozone AZO, Carmax Inc. KMX, O'Reilly Automotive Inc. ORLY, and US Auto Parts Network Inc. PRTS.  All three of these companies carry a Zacks Rank #2 (Buy). 

Bottom Line

January was a horrible month for Industrial Production (down 0.2%), Manufacturing (down 0.9%), and Auto production (down 5.1%), but with the Polar Vortexes behind us, the Auto Parts Segments are now surging. 

The companies listed above have a strong history of beating their earnings estimates, and are stocks to consider when looking into the Auto Parts Industry.  With the help of Zacks Rank, you can identify these Industries that are poised for sustained growth for the next several months.  So if you are thinking of riding this manufacturing wave for investment purposes, PLOW, MPAA, REMY, or AAP could be excellent picks over the next few months. 

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