Zacks Industry Outlook O'Reilly and Advance Auto Parts

For Immediate ReleaseChicago, IL – June 25, 2026 – Today, Zacks Equity Research O’Reilly Automotive ORLY and Advance Auto Parts AAP.Industry: Auto PartsLink: https://www.zacks.com/commentary/2941943/2-auto-retail-parts-stocks-that-are-still-in-focus-in-a-tough-marketThe Zacks Automotive - Retail and Wholesale - Parts industry is navigating a tough environment. High interest rates continue to put pressure on dealer margins and consumer spending. Energy cost volatility, despite easing somewhat following the reopening of the Strait of Hormuz, keeps logistics and distribution expenses elevated.Supply chain constraints mean inventory restocking will remain a gradual, uneven process in the near term. However, a key structural tailwind partly offsetting these challenges is the rising average U.S. vehicle age, which keeps demand for maintenance and replacement parts resilient. Two industry players, O’Reilly Automotive and Advance Auto Parts, are worth considering despite the overall subdued outlook.About the IndustryThe Zacks Automotive - Retail and Wholesale - Parts industry players execute several functions. These include retailing, distribution and installation of vehicle parts, equipment and accessories. Vehicle parts and accessories include seat covers, antifreeze, engine additives, wiper blades, batteries, brake system components, belts, chassis parts, driveline parts, engine parts and fuel pumps. Consumers have two options. They can either opt for repairing vehicles on their own (the ‘do-it-yourself’ or ‘DIY’ segment) or take the assistance of a professional repair facility (the "do-it-for-me" or "DIFM" segment). The industry is highly competitive and undergoing a radical change, with evolving customer expectations and technological innovation acting as game changers.Key Investing ThemesInterest Rates & Financing Costs: Interest rate relief remains unlikely in the near term, with further hikes still possible if inflation persists. For auto retail parts businesses, this translates into elevated borrowing costs for both dealers financing inventory and consumers purchasing vehicles or parts on credit. High financing rates compress margins and slow down discretionary spending on non-essential parts and accessories, forcing the industry to operate lean while managing tighter cash flow constraints across the supply chain.Energy Prices & Inflation: The recent deal to reopen the Strait of Hormuz has resumed oil tanker movement, signaling that the peak of energy-driven inflation may be passing. Gas prices have fallen notably from May highs, offering some consumer relief. However, risk premiums on regional tanker traffic are unlikely to vanish quickly, keeping energy costs elevated. For parts retailers, this affects logistics, shipping, and distribution expenses, which remain a persistent pressure point on overall operational costs.Inventory Restocking Challenges: Depleted inventories across the auto parts supply chain will take months to fully replenish. Even as energy and supply conditions gradually stabilize, the pipeline for restocking remains slow and uneven. Parts retailers face the dual challenge of meeting current demand while managing the cost and timing of incoming stock. Delays in replenishment can lead to lost sales, customer dissatisfaction, and increased pressure on parts retailers to source from costlier alternative suppliers.Aging Vehicle Fleet Supports Demand: With the average U.S. vehicle age hitting a record 12.8 years, demand for maintenance and replacement parts has never been more reliable. Older vehicles require more frequent repairs and part replacements, directly benefiting the aftermarket industry. Additionally, consumers are increasingly holding onto their existing vehicles longer rather than purchasing new ones — a trend amplified by high car prices and tight credit conditions. This sustained behavioral shift provides a strong and consistent tailwind for auto parts retailers and repair shops, helping offset broader industry headwinds.Zacks Industry Rank Signals Lackluster ProspectsThe Zacks Auto Retail & Wholesale Parts industry is within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #180, which places it in the bottom 27% of roughly 245 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull 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 bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are getting pessimistic about this group’s earnings growth potential. Over the past year, the industry's earnings estimate for 2026 has declined 10%.Before we present a few stocks that could still be on your watchlist, let’s take a look at the industry’s shareholder returns and current valuation first.Industry Lags Sector and S&P 500The Zacks Auto Retail and Wholesale Parts industry has underperformed the Auto, Tires and Truck sector and the Zacks S&P 500 composite over the past year. The industry has declined 9% over this period against the sector and S&P 500’s growth of 21% and 27%, respectively.Industry's Current ValuationSince automotive companies are debt-laden, it makes sense to value them based on the Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA) ratio.Based on the trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 22.87X compared with the S&P 500’s 18.49X and the sector’s 27.8X.Over the past five years, the industry has traded as high as 32.64X and as low as 22.15X, with the median being 26.22X.2 Stocks to Watch NowO'Reilly is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. The company continues to expand its footprint aggressively, targeting 225-235 net new store openings in 2026 after adding 59 net new stores during the first quarter across the United States, Mexico and Canada. O’Reilly’s business remains resilient, with the company delivering record revenues for 33 consecutive years.Management reaffirmed its 2026 comparable-store sales growth outlook of 3-5%, signaling confidence in continued demand and execution. O’Reilly also remains committed to shareholder returns through substantial share repurchases. In the first quarter, O’Reilly bought back 10 million shares for $923 million and repurchased an additional 3.6 million shares for $338 million through April 29, leaving roughly $1.14 billion available under its existing authorization.O’Reilly currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2026 and 2027 EPS implies year-over-year growth of 9% and 11%, respectively. The consensus mark for the current and next year has moved north by 4 cents and 6 cents, respectively, over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Advance Auto primarily sells replacement parts, batteries, accessories, and maintenance products for a broad range of vehicles. Following the completion of its store footprint optimization program in 2025, the company has shifted its focus toward growth in markets where it already enjoys strong store density. Management plans to open 40-45 new stores in 2026 while expanding its distribution network to improve product availability and delivery speed.Advance Auto is also pursuing supply chain consolidation and implementing a new operating model designed to enhance efficiency and strengthen service levels, particularly for professional customers. These initiatives are expected to support a return to growth, with management projecting 1-2% sales growth in 2026. Profitability is also anticipated to improve, with adjusted operating margins expected to reach 3.8%-4.5% this year and expand further in 2027.Advance Auto currently carries a Zacks Rank #3. The Zacks Consensus Estimate for its 2026 and 2027 EPS implies year-over-year growth of 30% and 34%, respectively. The consensus mark for the current and next year has moved north by 10 cents and 3 cents, respectively, over the past 30 days.Free: Instant Access to Zacks' Market-Crushing StrategiesSince 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. 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