Zacks Industry Outlook Dorman Products and Standard Motor Products

Industry Overview - The Zacks Automotive - Replacement Parts industry focuses on the production, marketing, and distribution of replacement components for the automotive aftermarket, including essential parts like engine, steering, and brakes [3] - The industry is less exposed to economic downturns as consumers prefer to repair older vehicles rather than purchase new ones, leading to consistent demand for replacement parts [3] Key Investing Themes - The average age of vehicles in the U.S. reached an all-time high of 12.6 years in 2024, driving demand for automotive replacement parts due to the need for more frequent repairs and maintenance [4] - The shift towards electrification, autonomy, and digitization in the automotive industry is creating new growth opportunities in the replacement parts market, requiring advanced components and skilled technicians [5] Industry Performance - The Zacks Automotive - Replacement Parts industry has underperformed compared to the Auto, Tires, and Truck sector and the S&P 500, declining 17% over the past year while the sector and S&P 500 grew by 27% and 29%, respectively [9] - The industry is currently trading at an EV/EBITDA ratio of 8.8X, significantly lower than the S&P 500's 18.84X and the sector's 22.78X, indicating an attractive valuation [10] Company Highlights Dorman Products - Dorman Products is a key player in the aftermarket industry, focusing on replacement and upgrade parts, with a strong balance sheet and a debt-to-capitalization ratio of 28% [11] - The company has consistently surpassed earnings estimates, with an average surprise of 35%, and is expected to see year-over-year growth of 4% in sales and 9% in earnings for 2025 [12] Standard Motor Products - Standard Motor Products is a leading manufacturer of automotive replacement parts, with a focus on engine management and temperature control systems, and has expanded its geographic presence through the acquisition of Nissens [20] - The company has a long-term debt-to-capital ratio of 0.17, lower than the industry average, and has repurchased $10.4 million of shares in the first nine months of 2024 [20] - The Zacks Consensus Estimate for Standard Motor's 2025 sales and earnings implies year-over-year growth of 2.3% and 11.3%, respectively [21]