Tune-Up Your Portfolio with These 2 Cheap Auto Parts Stocks

NASDAQ: LKQ | LKQ Corp. News, Ratings, and Charts

LKQ – The demand for auto parts remains strong, as evidenced by surging e-commerce aftermarket sales. Despite deepening supply chain disruptions, strong demand and technological advancements in manufacturing processes should benefit the industry in the coming months. Therefore, we think it could be wise to scoop up quality auto parts stocks LKQ (LKQ) and Allison Transmission (ALSN). These names are currently trading at discounts to their peers. Read on.

While the Russia-Ukraine conflict has exacerbated logistical disruptions, the auto parts industry has witnessed strong demand. The adoption of advanced technology in aftermarket component manufacturing and rising e-commerce sales of auto parts should keep driving the industry’s growth.

In addition, demand for electric vehicles is rising with highly fluctuating oil prices, which is expected to drive growth in the auto parts sector. The worldwide automotive aftermarket is expected to grow at a 4.8% CAGR through 2030.

Therefore, we think fundamentally strong yet reasonably priced auto parts stocks LKQ Corporation (LKQ) and Allison Transmission Holdings, Inc. (ALSN) could be solid bets now.

LKQ Corporation (LKQ)

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

On February 17, 2022, Dominick Zarcone, president and CEO, said, “The continued robust cash flow generation enabled us to maintain our balanced capital allocation policy, and through our stock repurchase program and inaugural quarterly dividend payment, we returned $950 million to our stockholders in 2021.”

For the fourth quarter, ended Dec. 31, 2021, LKQ’s revenue came in at $3.19 billion, up 7.9% year-over-year. Its net income was $236.28 million, up 30.5% year-over-year, while its EPS came in at $0.81, up 37.3% year-over-year.

In terms of forward Price/Book, LKQ’s 2.2x compares with the 2.69x industry average.

LKQ’s revenue is expected to be $13.93 billion in 2023, representing a 3.2% rise. Its EPS is estimated to increase 33.5% per annum for the next five years. The stock surpassed the EPS estimates in each of the trailing four quarters, and has gained 6.5% over the past year to close yesterday’s trading session at $45.53.

LKQ’s POWR Ratings reflect its promising outlook. It has an overall B rating which represents a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

LKQ has a B grade for Value, Sentiment, and Quality. It is ranked #3 of 69 stocks in the Auto Parts industry. Click here to see the additional POWR Ratings for LKQ (Growth, Momentum, and Stability).

Allison Transmission Holdings, Inc. (ALSN)

ALSN, together with its subsidiaries, designs, manufactures, and sells commercial and defense fully-automatic transmissions for medium-and heavy-duty commercial vehicles and medium- and heavy-tactical U.S. defense vehicles worldwide. ALSN is headquartered in Indianapolis, Ind.

On March 9, 2022, ALSN announced its partnership with Mack Trucks to expand its medium-duty product portfolio. Rohan Barua, Vice President, North America Sales, Global Channel and Aftermarket of ALSN, said, “The increased ratings enabled by our 3000 Series transmission will increase the MD Series addressable market by approximately 25,000 vehicles annually, expanding vehicle options for Mack’s customers and adding breadth of applications to the company’s medium-duty portfolio.”

For the fourth quarter, ended Dec. 31, 2021, ALSN’s net sales increased 20.4% year-over-year to $644 million. The company’s net income came in at $118 million, up 96.7% year-over-year, while its EPS was  $1.15, up 117% year-over-year.

ALSN’s 6.86x non-GAAP forward P/E compares with the 17.97x industry average.

ALSN’s revenue is expected to grow 13% year-over-year to $2.71 billion in 2022. Its EPS is estimated to grow 26.9% year-over-year to $5.24 in 2022. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 13.7% to close yesterday’s trading session at $40.36.

ALSN has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Quality and a B grade for Value.

ALSN is ranked #18 in the Auto Parts industry. Click here to see ALSN’s growth, Momentum, Stability, and sentiment ratings.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year


LKQ shares were trading at $47.05 per share on Tuesday morning, up $1.52 (+3.34%). Year-to-date, LKQ has declined -21.19%, versus a -2.95% rise in the benchmark S&P 500 index during the same period.


About the Author: Riddhima Chakraborty


Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
LKQGet RatingGet RatingGet Rating
ALSNGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Does Trump Change Stock Market Outlook?

The rally of the S&P 500 (SPY) after the election gives a sense that investors are happy that Trump was elected. But perhaps there is more to this story than meets the eye. That’s why Steve Reitmeister shares his updated market outlook taking into account the pros and cons of Trumps proposed new policies. This comes with a preview of his top 11 stocks to buy now.

3 Streaming Stocks Benefiting from Cord-Cutting Trends

As streaming continues to dominate the digital entertainment landscape, the global streaming market presents a lucrative investment opportunity. So, it could be ideal to invest in fundamentally solid streaming stocks Netflix (NFLX), Walt Disney (DIS), and Roku (ROKU). Read further...

3 Gold Stocks to Buy as Safe-Haven Demand Grows

Gold is a stable investment now due to its role as a safe-haven asset during economic uncertainty, rising demand, industrial use, and growth, bolstered by central bank purchases and interest rate cuts. Therefore, investors should consider investing in top gold stocks such as Newmont (NEM), Barrick Gold (GOLD), and Agnico Eagle Mines (AEM). Read more...

3 AI Stocks Transforming Industries and Driving Future Growth

With rapid digitalization, rapid adoption, and development, as well as surging demand, the AI market is on the rise. Amid this backdrop, investors could buy fundamentally solid AI stocks NVIDIA Corporation (NVDA), Microsoft (MSFT), and Meta Platforms (META) poised for substantial gains. Continue reading...

Updated Stock Market Expectations

The S&P 500 (SPY) has already reached an impressive goal of hitting 6,000. Yet you can see how much shares are struggling now up against this resistance. Steve Reitmeister shares his views on what comes next for the market and his top 10 stocks to stay on the right side of the action.

Read More Stories

More LKQ Corp. (LKQ) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All LKQ News