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Auto-Parts Retailers Look Compelling Amid Sell-Off

Despite O’Reilly’s disappointing sales numbers, we think the sector can withstand digital threats and offers some opportunities for long-term investors.

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Zain Akbari: While we were disappointed by O'Reilly's second-quarter earning pre-announcement, which featured 1.7% comparable store sales growth, which was much lower than guidance--which was closer to 3% to 5%--we do still think that the larger scaled parts retailers do offer long-term investors considerable advantages. 

That said, we do plan to reduce our fair value estimates by about mid- to high-single digits as a percentage. However, we do see a long-term opportunity as these larger scaled part retailers take advantage of the fact that they can provide better service levels than their smaller scale peers and also ward off digital threats. 

Zain Akbari does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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