As more individuals aspire to own cars, the need for auto parts to support manufacturing and maintenance grows. Furthermore, an aging vehicle population exacerbates the need for maintenance services and replacement parts.
Given the industry’s tailwinds, investors could consider fundamentally sound auto parts stocks, such as BorgWarner Inc. (BWA), Genuine Parts Company (GPC), and Autoliv, Inc. (ALV), primed for reliable gain.
The demand for auto parts and accessories is growing due to the increasing regional demand, government incentives, and easy access to raw materials. Enhanced government backing for the development of new vehicles with more efficient engines is fueling consumer interest in auto parts and accessories, thereby driving market growth.
As a result, the global auto parts & accessories market is projected to grow at a CAGR of 3.9% by 2032.
Moreover, the growing global demand for automobiles, the rise in government initiatives promoting the growth and sustainability of the automotive industry, and the increasing consumer desire for enhanced comfort, connectivity, and convenience features in vehicles are driving the auto parts manufacturing market.
Looking forward, IMARC Group expects the global auto parts manufacturing market to grow at a CAGR of 2.4% from 2024 to 2032.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Auto Parts industry stocks, beginning with the third choice.
Stock #3: BorgWarner Inc. (BWA)
BWA provides solutions for combustion, hybrid, and electric vehicles worldwide. It offers turbochargers, eBoosters, eTurbos, timing systems, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery modules and systems, battery heaters, and battery charging.
In terms of the trailing-12-month EBIT margin, BWA’s 8.79% is 12.7% higher than the 7.80% industry average. Its 12.89% trailing-12-month EBITDA margin is 13.63% higher than the industry average of 11.34%. Moreover, its 5.43% trailing-12-month CAPEX/Sales is 80.1% higher than the industry average of 3.02%.
BWA’s net sales for the fiscal first quarter that ended March 31, 2024, increased 24.6% year-over-year to $3.60 billion. Its operating income rose 75% from the year-ago value to $295 billion. For the same period, net earnings attributable to BWA stood at $206 million. Its adjusted earnings per share increased 27.2% year-over-year to $1.03.
Analysts expect BWA’s revenue for the second quarter (ended June 2024) to increase 1% year-over-year to $3.71 billion. Its EPS is expected to grow 1.3% year-over-year to $0.99 for the quarter ending September 2024. Moreover, the company surpassed EPS estimates in three of the trailing four quarters.
BWA’s stock has plunged 1.8% over the past month to close the last trading session at $32.55.
BWA’s POWR Ratings reflect its outlook. The stock has a B grade for Quality and Value. It is ranked #32 out of 61 stocks in the B-rated Auto Parts industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Beyond what is stated above, we’ve also rated BWA for Growth, Stability, Momentum, and Sentiment. Get all BWA ratings here.
Stock #2: Genuine Parts Company (GPC)
GPC distributes automotive replacement parts, as well as industrial parts and materials. It operates in two segments: Automotive Parts Group and Industrial Parts Group segments.
On May 1, 2024, GPC announced an acquisition for its U.S. Automotive business. The company acquired Motor Parts & Equipment Corporation (MPEC), which should bolster its business.
In terms of the trailing-12-month net income margin, GPC’s 5.46% is 10.8% higher than the 4.93% industry average. Likewise, its 30.29% trailing-12-month ROCE is 154.8% higher than the industry average of 11.89%. Furthermore, the stock’s 12.79% trailing-12-month ROTC is 103.9% higher than the industry average of 6.27%.
GPC’s net sales for the fiscal year, which ended on June 30, 2024, increased 5.9% year-over-year to $5.96 billion. Its gross profit rose 15.6% over the prior-year quarter to $2.18 billion. The company’s adjusted net was reported at $341.56 million, and adjusted earnings per share at $2.44.
GPC’s revenue is expected to increase 3.5% year-over-year to $6.03 billion for the third quarter ending September 2024. Its EPS is expected to rise 2.2% year-over-year to $2.54. The company surpassed its EPS estimates in three of the trailing four quarters, which is promising.
Shares of GPC have gained 4.4% over the past month to close the last trading session at $137.21.
GPC’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
GPC has a B grade for Quality and Stability. It is ranked #26 in the same industry.
In addition to the POWR Ratings highlighted above, one can access GPC’s ratings for Sentiment, Value, Growth, and Momentum here.
Stock #1: Autoliv, Inc. (ALV)
Headquartered in Stockholm, Sweden, ALV develops, manufactures, and supplies passive safety systems to the automotive industry in Europe, the Americas, China, Japan, and the rest of Asia.
On June 4, 2024, ALV’s Autoliv China and XPENG AEROHT, Asia’s leading flying car innovator, signed a strategic cooperation agreement to pioneer safety solutions for future mobility. ALV and XPENG AEROHT have collaborated on various initiatives to develop safety solutions for flying cars.
ALV’s trailing-12-month EBIT margin of 14.66% is 43.2% higher than the industry average of 10.23%, and its trailing-12-month EBITDA margin of 15.81% is 14% higher than the industry average of 13.87%. In addition, the stock’s trailing-12-month net income margin of 9.23% is 53.1% higher than the 6.03% industry average.
ALV’s net sales for the second quarter that ended June 30, 2024, stood at $2.61 billion. Its adjusted operating income grew 4.4% over the prior-year quarter to $221 million. In addition, its adjusted earnings per share was reported at $1.87.
For the quarter ending September 30, 2024, ALV’s revenue and EPS are expected to increase 1.1% and 25.8% year-over-year to $2.63 billion and $2.09, respectively.
The stock has gained 2.3% over the past nine months to close the last trading session at $98.23.
ALV’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
ALV has a B grade for Value and Quality. It is ranked #17 in the same industry.
Click here to access the additional ALV ratings (Growth, Stability, Momentum, and Sentiment).
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GPC shares were trading at $136.30 per share on Wednesday afternoon, down $0.91 (-0.66%). Year-to-date, GPC has declined -0.25%, versus a 14.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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