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The Auto Parts Trade: AutoZone Vs. Advance Vs. O'Reilly

Mark Fritz

Keep a vehicle long enough and you’re bound to make a trip to the parts store, but which of the big chains is best positioned to motor ahead?

No. 2 Advance Auto Parts, Inc. (NYSE: AAP) is looking like an also-ran compared to AutoZone, Inc. (NYSE: AZO) and O'Reilly Automotive Inc (NASDAQ: ORLY), according Bank of America Merrill Lynch analyst Elizabeth L. Suzuki.

Advance Losing Market Share

She put Advance at Underperform and set a price target of $87.50, reinstating coverage of the stock and two of its rivals. It was trading at $97.94, down 12 cents at last check.

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She rated AutoZone at Buy and set a price target of $625. It was trading at $544.55, up 5.78 percent, at last check.

She rated O’Reilly Automotive a Buy with a price target of $250. It was at $200.15, up 1.61 percent.

Advance has been hit hardest among the parts chains, down 42 percent on the year compared to 30 percent for the sector, she wrote. Its problems include market share loss and restructuring efforts that have yet to pay off in earnings growth.

Advance has to be hoping for restructuring initiates to bear fruit, a significant downturn in new vehicle sales, improvements in the supply chain or a buyout by one of its competitors.

Industry leader AutoZone seems position to withstand the online and bricks-and-mortar competition, she wrote.

No. 3 O’Reilly plans to add 190 stores this year and its robust network of distribution centers and hub stores enables it to deliver parts quickly.

Related Link: Shifting Gears On Auto Parts Stores

Latest Ratings for AAP

Date Firm Action From To
Sep 2017 Bank of America Reinstates Underperform
Aug 2017 Barclays Upgrades Underweight Equal-Weight
Aug 2017 Barclays Maintains Underweight

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