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3 Auto Stocks to Capitalize on Aging U.S. Vehicles
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Per the latest report released by S&P Global Mobility, the average age of U.S. vehicles hit a new record of 12.4 years in 2024, an increase of two months from 2023. This marks the seventh consecutive year of rising average vehicle age in the United States.
With vehicles aging, the demand for repairs and maintenance rises, creating more opportunities for companies involved in the aftermarket and vehicle service industries. Dorman Products (DORM - Free Report) , Rush Enterprises (RUSHA - Free Report) and Genuine Parts (GPC - Free Report) stand out as potential additions to your portfolio. Before discussing these companies, let’s explore the factors behind vehicle longevity and key takeaways from the S&P Global Mobility report.
What’s Driving the Vehicle Age?
For starters, advancements in technology have improved vehicle quality, allowing cars to last longer.
Additionally, the high cost of new vehicles is a significant factor. The average selling price of a new vehicle in the United States was more than $45,000 last month. Despite a decrease of more than $2,000 from the peak in December 2022, prices remain high, causing many consumers to delay new purchases and extend the lifespan of their current vehicles. Todd Campau, aftermarket practice lead at S&P Global Mobility, said, "The prices are prohibitively high for a lot of households now. So, I think consumers are being painted into the corner of having to keep the vehicle on the road longer."
Another consideration is the uncertainty about the future of electric vehicles (EVs). Many consumers are hesitant to buy new cars, waiting to see how the EV market and charging infrastructure develop, resulting in consumers keeping their existing cars longer.
Key Insights From the Report
Campau highlights that more vehicles are entering the prime range for aftermarket service, typically between 6 and 14 years old. Over 110 million vehicles fall into this category, representing nearly 38% of the fleet, and this is expected to grow to 40% by 2028.
In January, the U.S. vehicle fleet reached 286 million vehicles in operation (VIO), a 2 million increase from 2023. However, the age distribution is shifting. In 2019, vehicles under six years old comprised 98 million, or 35%, of the fleet. Now, they number fewer than 90 million and are not expected to reach previous levels until 2028, when they will constitute about 30% of the fleet. This shift is largely due to COVID-19 and supply chain shortages that disrupted vehicle supply and registrations after high volumes from 2015 to 2019.
As a result, vehicles aged 6-14 years and older will drive VIO growth, making up about 70% of the fleet over the next five years and boosting aftermarket service opportunities.
3 Stocks to Consider
Rush Enterprises: It is a leading provider of solutions to the commercial vehicle industry and also offers a full range of aftermarket solutions.With over 150 locations spanning 23 states and Ontario, Canada, including 125 franchised dealership locations, Rush is a dominant force in the industry. In the first quarter of 2024, Rush Enterprises experienced healthy growth in aftermarket demand, specifically from customers in the public sector, the refuse (waste management) industry and those involved in medium-duty vehicle leasing. Strong FCF generation, disciplined expense management approach and investor-friendly moves are praiseworthy. Rush has increased its payout seven times in the last five years, with an average annualized growth rate of 30.4%.
RUSHA carries a Zacks Rank #1 (Strong Buy) and has a Value Score of A. The Zacks Consensus Estimate for the company’s 2024 and 2025 EPS has moved up by 10 cents and 1 cent, respectively, over the past 30 days. It has also managed to pull off an earnings surprise in the last four quarters.
Dorman: The company is a key player in the motor vehicle aftermarket industry, focusing on replacement and upgrade parts. It consistently expands its product line, introducing hundreds of new direct replacement parts and assemblies designed to match or improve upon the performance of original equipment. The acquisition of Super ATV has significantly boosted the company's overall prospects. Dorman's dedication to regular product launches and ongoing innovation fuels its sustained growth. With a strong balance sheet, a manageable debt-to-capitalization ratio of 29% (compared to the industry average of 42%) and ample liquidity, Dorman is well-poised for success. Investor-friendly moves like share buybacks further instill confidence.
DORM carries a Zacks Rank #2 (Buy) and has a Value Score of B. The Zacks Consensus Estimate for Dorman Products’ 2024 and 2025 sales implies year-over-year growth of 4% and 5%, respectively. The consensus mark for EPS implies year-over-year growth of 24% and 12%, respectively. DORM is witnessing northbound estimate revisions for the current and next year.
Image Source: Zacks Investment Research
Genuine Parts: The company distributes automotive and industrial replacement parts and materials. The acquisition of Motor Parts & Equipment Corporation in April 2024 has strengthened GPC’s ownership of NAPA stores across the key Midwest region of the United States. GPC also expanded its Motion business in North America with a small acquisition, enhancing fluid power and repair services. Genuine Parts’ efforts to improve supply chain efficiency, streamline operations and enhance customer service augurs well. The company’s dividend-aristocratic status adds to its strengths. It approved a $4 per share annual dividend for 2024, representing its 68th consecutive annual increase in the payout.
GPC carries a Zacks Rank #3 (Hold) currently and has a Value Score of B. The Zacks Consensus Estimate for Genuine Parts’ 2024 and 2025 sales implies year-over-year growth of 3% and 4%, respectively. The consensus mark for EPS implies year-over-year growth of 6% and 9%, respectively. The company is witnessing northbound estimate revisions for the current and next year.
Image Source: Zacks Investment Research
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3 Auto Stocks to Capitalize on Aging U.S. Vehicles
Per the latest report released by S&P Global Mobility, the average age of U.S. vehicles hit a new record of 12.4 years in 2024, an increase of two months from 2023. This marks the seventh consecutive year of rising average vehicle age in the United States.
With vehicles aging, the demand for repairs and maintenance rises, creating more opportunities for companies involved in the aftermarket and vehicle service industries. Dorman Products (DORM - Free Report) , Rush Enterprises (RUSHA - Free Report) and Genuine Parts (GPC - Free Report) stand out as potential additions to your portfolio. Before discussing these companies, let’s explore the factors behind vehicle longevity and key takeaways from the S&P Global Mobility report.
What’s Driving the Vehicle Age?
For starters, advancements in technology have improved vehicle quality, allowing cars to last longer.
Additionally, the high cost of new vehicles is a significant factor. The average selling price of a new vehicle in the United States was more than $45,000 last month. Despite a decrease of more than $2,000 from the peak in December 2022, prices remain high, causing many consumers to delay new purchases and extend the lifespan of their current vehicles. Todd Campau, aftermarket practice lead at S&P Global Mobility, said, "The prices are prohibitively high for a lot of households now. So, I think consumers are being painted into the corner of having to keep the vehicle on the road longer."
Another consideration is the uncertainty about the future of electric vehicles (EVs). Many consumers are hesitant to buy new cars, waiting to see how the EV market and charging infrastructure develop, resulting in consumers keeping their existing cars longer.
Key Insights From the Report
Campau highlights that more vehicles are entering the prime range for aftermarket service, typically between 6 and 14 years old. Over 110 million vehicles fall into this category, representing nearly 38% of the fleet, and this is expected to grow to 40% by 2028.
In January, the U.S. vehicle fleet reached 286 million vehicles in operation (VIO), a 2 million increase from 2023. However, the age distribution is shifting. In 2019, vehicles under six years old comprised 98 million, or 35%, of the fleet. Now, they number fewer than 90 million and are not expected to reach previous levels until 2028, when they will constitute about 30% of the fleet. This shift is largely due to COVID-19 and supply chain shortages that disrupted vehicle supply and registrations after high volumes from 2015 to 2019.
As a result, vehicles aged 6-14 years and older will drive VIO growth, making up about 70% of the fleet over the next five years and boosting aftermarket service opportunities.
3 Stocks to Consider
Rush Enterprises: It is a leading provider of solutions to the commercial vehicle industry and also offers a full range of aftermarket solutions.With over 150 locations spanning 23 states and Ontario, Canada, including 125 franchised dealership locations, Rush is a dominant force in the industry. In the first quarter of 2024, Rush Enterprises experienced healthy growth in aftermarket demand, specifically from customers in the public sector, the refuse (waste management) industry and those involved in medium-duty vehicle leasing. Strong FCF generation, disciplined expense management approach and investor-friendly moves are praiseworthy. Rush has increased its payout seven times in the last five years, with an average annualized growth rate of 30.4%.
RUSHA carries a Zacks Rank #1 (Strong Buy) and has a Value Score of A. The Zacks Consensus Estimate for the company’s 2024 and 2025 EPS has moved up by 10 cents and 1 cent, respectively, over the past 30 days. It has also managed to pull off an earnings surprise in the last four quarters.
Image Source: Zacks Investment Research
You can see the complete list of today’s Zacks #1 Rank stocks here.
Dorman: The company is a key player in the motor vehicle aftermarket industry, focusing on replacement and upgrade parts. It consistently expands its product line, introducing hundreds of new direct replacement parts and assemblies designed to match or improve upon the performance of original equipment. The acquisition of Super ATV has significantly boosted the company's overall prospects. Dorman's dedication to regular product launches and ongoing innovation fuels its sustained growth. With a strong balance sheet, a manageable debt-to-capitalization ratio of 29% (compared to the industry average of 42%) and ample liquidity, Dorman is well-poised for success. Investor-friendly moves like share buybacks further instill confidence.
DORM carries a Zacks Rank #2 (Buy) and has a Value Score of B. The Zacks Consensus Estimate for Dorman Products’ 2024 and 2025 sales implies year-over-year growth of 4% and 5%, respectively. The consensus mark for EPS implies year-over-year growth of 24% and 12%, respectively. DORM is witnessing northbound estimate revisions for the current and next year.
Image Source: Zacks Investment Research
Genuine Parts: The company distributes automotive and industrial replacement parts and materials. The acquisition of Motor Parts & Equipment Corporation in April 2024 has strengthened GPC’s ownership of NAPA stores across the key Midwest region of the United States. GPC also expanded its Motion business in North America with a small acquisition, enhancing fluid power and repair services. Genuine Parts’ efforts to improve supply chain efficiency, streamline operations and enhance customer service augurs well. The company’s dividend-aristocratic status adds to its strengths. It approved a $4 per share annual dividend for 2024, representing its 68th consecutive annual increase in the payout.
GPC carries a Zacks Rank #3 (Hold) currently and has a Value Score of B. The Zacks Consensus Estimate for Genuine Parts’ 2024 and 2025 sales implies year-over-year growth of 3% and 4%, respectively. The consensus mark for EPS implies year-over-year growth of 6% and 9%, respectively. The company is witnessing northbound estimate revisions for the current and next year.
Image Source: Zacks Investment Research