The auto parts retail industry took a big hit on Wednesday after O’Reilly Automotive Inc. (NASDAQ: ORLY) provided an update ahead of its second-quarter financial results. This update was absolutely catastrophic, and now there is blood in the water. As a result analysts have taken the bait and are thrashing this industry.
O’Reilly wasn’t the only one that suffered. Advance Auto Parts Inc. (NYSE: AAP) and AutoZone Inc. (NYSE: AZO) also saw their shares hit multiyear lows in the wake of this announcement.
As for O’Reilly’s report, the company said that its same-store sales increased only 1.7%, below its previously issued guidance of 3% to 5%. This also fell below the 3.9% consensus estimate at FactSect.
CEO Greg Henslee commented that the company has faced a more challenging sales environment than it expected for the quarter due to continued headwinds. Henslee closed by saying:
We remain confident in the long-term health of our industry and our team’s ability to provide exceptional customer service and take market share in this challenging demand environment.
[nativounit]
Analysts seemed to key off the idea of a challenging demand environment in the industry. Wedbush commented:
The company attributed the slowdown to weak consumer demand and knock-on effects from a second consecutive mild winter … but we also pointed to additional pressures including the slowdown in total miles driven growth, declines in miles driven for “sweet spot” 8+ year old vehicles, muted low-end and minority consumer confidence and rising competition from the online channel. We do not expect a sharp reversal in these factors near-term, leaving us neutral on the sector despite the stock price corrections.
Although Wedbush saw most of the industry as remaining Neutral, the firm actually saw a bright spot with one of the companies. The firm has an Outperform rating for Advance Auto Parts with a $150 price target, versus a $105.21 closing price.
Other analysts piled into these auto parts retailers, and price targets were falling across the board:
- Barclays cut Advance Auto Parts’ price target to $93 from $120.
- Morgan Stanley cut Advance Auto Parts’ price target to $125 from $160.
- RBC cut Advance Auto Parts’ price target from $153 to $125.
- Barclays cut AutoZone’s price target to $710 from $870.
- Morgan Stanley downgraded AutoZone to Equal Weight from Overweight and cut its price target to $540 from $680.
- RBC cut AutoZone’s price target price to $577 from $653.
- Wedbush reiterated a Neutral rating for AutoZone with a $650 price target.
- Barclays cut O’Reilly’s price target from $300 to $234.
- Credit Suisse downgraded O’Reilly to Neutral from Outperform and lowered its price target to $195 from $262.
- Goldman Sachs upgraded O’Reilly to a Neutral rating from Sell.
- Morgan Stanley downgraded O’Reilly to Equal Weight from Overweight and cut its price target from $290 to $200.
- Wedbush has a Neutral rating and cut its price target to $195 from $260.
Shares of O’Reilly were last seen trading at $178.99, with a consensus analyst price target of $270.14 and a 52-week range of $177.57 to $292.84.
Advance Auto Parts shares were trading down 1.3% at $103.82. The stock has a 52-week range of $103.57 to $177.83 and a consensus price target of $154.19.
AutoZone traded at $517.75, within a 52-week range of $504.01 to $819.54. The consensus price target is $736.82.
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