Auto Parts Stocks: 3 To Drive, 3 To Park

Even though U.S. new-car sales rose 7.5% in August, don�t expect that bump to take the air out of the right auto parts stocks. Here�s why: Before the recession hit in 2008, the U.S. auto industry was selling an average of 16 million new vehicles a year. And while this year�s forecast of 12.5 million vehicles is a big improvement from the 10.4 million the industry sold two years ago, it�s a far cry from being back to �normal.”

With high unemployment, tight credit and sinking consumer confidence, fixing up the clunker in the driveway might just be the new �normal.” Since the average car on the road today is 11 years old, that translates into a continued growth opportunity for auto parts stocks.

With that in mind, here are three auto parts stocks to drive — and three to park:

Drive

AutoZone (NYSE:AZO). AutoZone on Tuesday reported fourth-quarter earnings growth of 12.1% to $301.5 million ($7.18 per share); net sales jumped 8% to $2.6 billion. Same-store sales, which measure performance against direct competitors, grew 4.5%. For the full year, sales increased 9.6% to $8.1 billion; full-year earnings rose 15% to $849 million. One key measure of AZO�s strength: for the first time in its history, commercial sales accounted for more than $1 billion. This will be a growth opportunity for AutoZone in the future. At $327.75, AZO is trading more than 53% above its 52-week low of $214 last September. With a market cap of $23.62 billion, AZO has a price/earnings-to-growth ratio of 1.14, meaning it�s only slightly overvalued.

LKQ Corp. (NASDAQ:LKQX) LKQ, which will next report earnings on Oct. 24, sells new and recycled auto parts, providing a lower-cost option for consumers. Last year�s acquisition of Cross Canada Body Parts and Paint Circuit gave LKQ a strong Canadian presence, as well as 300 more locations in North America. At $25.51, LKQ is trading more than 27% above its 52-week low of $19.94 last September. With a market cap of $3.74 billion, LKQ has a PEG ratio of 1.08, meaning it is fairly valued.

O�Reilly Automotive (NASDAQ:ORLY) O�Reilly, which next reports earnings on Oct. 26, boasts 3,657 stores in 39 states. ORLY said last week it has lowered its credit facility from $750 million to $660 million in exchange for lower interest rates and a longer term through 2016. ORLY set a new 52-week high of $72 on Monday and, at $70.42, is more than 36% higher than its 52-week low of $51.71 last September. With a market cap of $9.57 billion, the stock has a PEG ratio of 1.19, indicating it is slightly overvalued.

Park

Pep Boys (NYSE:PBY). While Manny, Moe and Jack earlier this month reported 31% earnings growth for the second quarter ($13.9 million), revenue rose only 3.5% ($523 million). PBY purchased the Big 10 Tire Stores chain and is generating more repair work, but same-store sales in the quarter slumped by 1.3%. PBY hit a new 52-week low of $8.18 on Aug. 9. At $9.81, PBY is trading more than 38% below its 52-week high of $15.96 in January. With a market cap of $516.73 million, the stock has a PEG ratio of 0.99, meaning it is slightly undervalued. PBY last week declared a three-cent (1.2% yield) dividend.

U.S. Auto Parts Network (NASDAQ:PRTS) U.S. Auto Parts, which next reports earnings on Nov. 8, is a hybrid of old and new commerce: It sells body, engine and performance parts over the Internet. In August, it purchased the 95-year-old Whitney Automotive Group for $27.5 million and assumption of $11 million in other obligations. PRTS set a new 52-week low of $4.53 on Tuesday — more than 54% below its 52-week high of $9.97 in January. With a market cap of $138.43 million, the stock has a PEG ratio of -2.69, indicating the company is losing money.

Genuine Parts Co. (NYSE:GPC). GPC, which next reports earnings on Oct. 10, provides real NAPA replacement parts through its 58 U.S. distribution centers. Its Automotive Parts Group also includes NAPA Canada and Auto Todo in Mexico. GPC�s strength in pricier NAPA parts might be its short-term weakness: Competition is weighing on margins. At $52.18, GPC is trading 9.5% below its 52-week high of $57.66 in July. With a market cap of $8.18 billion, it has a PEG ratio of 1.4, meaning it�s slightly overvalued. Still, the company has paid a dividend every year since 1968 — the current yield is 3.4%.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.