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The electric vehicle (EV) industry is expected to grow significantly in the long run. However, the ongoing semiconductor chip shortage continues to impact EV production. According to a Deloitte report, the semiconductor shortage is expected to last until early 2023. So, the new vehicle shortage has led to increased demand for used vehicles.

Used car prices have been soaring. However, according to J.D. Power, “As high as used-vehicle prices are, new-vehicle prices are even higher, well over $40,000 on average.”

So, with the rising demand for used cars, the need for auto parts is expected to continue growing as people are still nervous about using public transport amid Omicron coronavirus concerns. According to a 360 Research Report, the auto parts and accessories market is expected to reach $2.57 trillion by 2026, growing at a CAGR of 2.8%.

Given this backdrop, fundamentally-sound auto parts stocks, Genuine Parts Company (GPC) and LKQ Corporation (LKQ), could be solid picks now. These stocks have an overall A (Strong Buy) rating in our proprietary POWR Ratings system.

Genuine Parts Company (GPC)

GPC distributes automotive replacement parts, industrial parts, and materials. The company distributes automotive replacement parts for imported vehicles, hybrid and electric vehicles, trucks, SUVs, motorcycles, and recreational vehicles. Also, it operates across the U.S., Canada, France, Australia, and internationally.

On Oct. 21, 2021, Paul Donahue, the Chairman, and CEO of GPC, said, “The GPC team was largely able to manage through supply chain disruptions, allowing us to deliver quality customer service. In addition, we further improved our balance sheet and generated strong cash flow which allows for the ongoing deployment of capital for growth and productivity investments, bolt-on acquisitions, the dividend and share repurchases.”

GPC’s net sales came in at $4.82 billion for the third quarter ended Sept. 30, 2021, up 10.3% year-over-year. The company’s adjusted net income increased 14.2% year-over-year to $270.48 million. Also, its adjusted EPS came in at $1.88, representing a 15.3% year-over-year rise.

Analysts expect GPC’s revenue to increase 13.3% year-over-year to $18.73 billion in fiscal 2021. Its EPS is expected to grow 27.3% year-over-year to $6.71 in the current year. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 18.9% to close Friday’s trading session at $129.18.

GPC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

GPC has a B grade for Quality, Sentiment, and Stability. Within the Auto Parts industry, it is ranked #1 out of 66 stocks. Click here to see GPC’s ratings for Growth, Momentum, and Value as well.

LKQ Corporation (LKQ)

LKQ distributes replacement parts, components, and systems used to repair and maintain vehicles. The company operates through three segments: North America; Europe; and Specialty.

On Dec. 2, 2021, LKQ paid its first-ever quarterly dividend of $0.25 per share. Dominick Zarcone, the company’s President and CEO had said on Oct. 28, “This dividend declaration and our existing stock repurchase program are key components of our strategic plan to drive total long-term value for our stockholders.”

For the fiscal third quarter ended Sept. 30, 2021, LKQ’s revenue increased 8.2% year-over-year to $3.30 billion. The company’s adjusted net income increased 31.6% year-over-year to $300.35 million. Moreover, its adjusted EPS increased 36% year-over-year to $1.02.

LKQ’s revenue is expected to be $13 billion in fiscal 2021, representing an 11.8% year-over-year rise. The company’s EPS is expected to increase year-over-year to $3.87 in the current year. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. The stock closed Friday’s trading session at $56.55.

It’s no surprise that LKQ has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Sentiment and Quality. LKQ is ranked #3 in the same industry. Click here to see the additional POWR Ratings for LKQ (Growth, Stability, Value, and Momentum).