2 Auto Replacement Stocks Poised to Gain From the Repair Boom

The Zacks Automotive - Replacement Parts industry is expected to benefit from the increasing average age (12.6 years) of vehicles in the U.S., leading to higher repair volumes, and from consumers choosing to repair rather than replace vehicles amid tariff-driven volatility in new car sales. Innovation in smart vehicle technology also presents new growth opportunities for the industry. Dorman Products (DORM) and Standard Motor Products (SMP), both with a Zacks Rank #2 (Buy), are highlighted as companies poised to capitalize on these trends, with SMP projecting higher sales and earnings growth for 2025.

Analysis

The Zacks Automotive - Replacement Parts industry exhibits a robust outlook, primarily driven by the aging U.S. vehicle fleet, now averaging 12.6 years, which fuels sustained demand for repairs. Tariff-induced volatility in new vehicle sales further supports this trend, as consumers are increasingly opting to repair existing vehicles rather than purchase new ones. Technological advancements, particularly the shift towards smart, tech-heavy vehicles, are creating new growth avenues, albeit requiring significant adaptation and investment. The industry holds a favorable Zacks Industry Rank #23, placing it in the top 9% of approximately 250 industries, and has seen a 2% upward revision in 2025 earnings estimates since the beginning of the year, indicating growing analyst confidence. Despite these positive fundamentals, the industry has underperformed the broader market and its sector over the past year, declining 5.4%, and currently trades at an attractive EV/EBITDA multiple of 8.61X, considerably lower than the S&P 500's 16.71X and its own 5-year median of 10.39X. Within this context, Dorman Products (DORM) and Standard Motor Products (SMP) are highlighted as strong contenders. Dorman Products showcases a solid balance sheet with a low debt-to-capitalization ratio of 25%, has consistently surpassed earnings estimates (average surprise of 28.95% over four quarters), and projects 5% sales and 10% earnings growth for 2025. Standard Motor Products also demonstrates strong performance, with an average earnings surprise of 38.55% over the past four quarters, and anticipates more substantial 2025 growth with sales projected up 17% and earnings by 13%, supported by strategic acquisitions like Nissens and a resilient supply chain with low tariff exposure.

Key Decisions for Investors

• Investors should consider the automotive replacement parts sector for potential investment, given its positive secular tailwinds from an aging vehicle fleet and favorable repair-over-replace trends, coupled with a currently attractive industry valuation relative to historical levels and the broader market.
• Dorman Products (DORM) and Standard Motor Products (SMP) warrant particular attention due to their Zacks Rank #2 (Buy) status, consistent earnings outperformance, and solid growth projections for 2025, with SMP showing notably higher anticipated top-line and bottom-line expansion.
• Monitor the industry's ability to effectively manage the rising costs associated with technological innovation in vehicle components and keep a close watch on the persistence of tariff impacts on new car sales, as these factors will be crucial for sustained margin protection and demand.