O'Reilly shares shine in lukewarm segment

Only shares of Springfield-based O’Reilly Automotive Inc. (Nasdaq: ORLY) were trading up Oct. 15, following news a Los Angeles investment bank downgraded its opinions of the auto parts sector.

Bloomberg Businessweek said shares of auto parts retailers began to fall when L.A.-based Wedbush initiated largely lukewarm coverage of the sector, noting auto parts companies would struggle to grow in the coming years.

In midday trading Oct. 15, O’Reilly Automotive shares were up 38 cents to $129.49. Meanwhile, shares of Advance Auto Parts Inc., AutoZone Inc. and Genuine Parts Co. all tumbled on Wall Street, the Associated Press reported.

Wedbush analyst Seth Basham gave O’Reilly an “outperform” rating and a $150 price target.

Basham told AP O’Reilly is the most attractive company in the segment, with stores in less populous markets where their peers would typically not locate. Citing healthy returns from both do-it-yourself customers and customers who want service done for them, he said O’Reilly also has a better parts distribution system and a motivated workforce.

The analyst cautioned the industry at large would experience changes in demographics and driving habits and an increasing complexity of parts that spell trouble for auto parts retailers.

Fewer young people are driving and repairing their own cars, and growing U.S. sales of new cars during the past few years means there will be fewer cars needing repairs, the report said. On the other hand, Internet retailers and discount stores pose little threat in such a service- and convenience-oriented industry.

O’Reilly shares closed Oct. 15 at $129.08 and hit a 52-week high during the day at $129.98.

Read more at Bloomberg Businessweek.