2 Auto Retailers to Watch Despite Cooling Sales and Global Tensions

Industry Overview - The Zacks Auto Retail and Wholesale industry is facing a subdued outlook due to affordability pressures, moderating sales, geopolitical risks, and a challenging electric vehicle (EV) landscape [1] - The industry plays a crucial role in how vehicles and auto parts reach consumers, operating through dealership networks and retail chains [2] Key Challenges - Affordability remains a significant challenge, with the average transaction price of a new vehicle around $49,353, making it unaffordable for many buyers [3] - Sales are projected to decline nearly 12% year over year in March, with full-year 2026 sales expected to decrease by 2.6% to 15.8 million units [4] - Geopolitical tensions, particularly in the Middle East, are raising fuel prices and impacting consumer sentiment towards big-ticket purchases [5] - The EV market is experiencing a decline in demand, with sales projected to drop nearly 28% year over year in the first quarter of 2026 [6] Industry Performance - The Zacks Auto Retail & Wholesale industry currently holds a Zacks Industry Rank of 213, placing it in the bottom 13% of nearly 245 Zacks industries [7] - The industry's earnings estimate for 2026 has declined by 8% over the past year, indicating a negative outlook [9] - The industry has underperformed the S&P 500 and the Auto, Tires, and Truck sector over the past year, which grew by 16.5% and 31.2%, respectively [11] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 8.37X, compared to the S&P 500's 16.55X and the sector's 27.48X [14] - Over the past five years, the industry has traded between 4.78X and 10.66X, with a median of 7.21X [15] Notable Companies - Penske Automotive (PAG): A leading automotive retailer with a diversified business model, expected to add around $450 million in annual revenues from recent acquisitions. The company has a Zacks Rank of 3 and is projected to see sales growth of 5.5% in 2026 [19][21] - AutoNation (AN): One of the largest automotive retailers in the U.S., expected to contribute over $650 million in annual revenues from recent deals. AutoNation also has a Zacks Rank of 3, with projected sales growth of 2% in 2026 [24][25]