ORLY O Reilly Automotive Inc

On Jan 23, we maintained our Outperform recommendation on Standard Motor Product Inc. (SMP) based on its strong brand recognition, less cyclical end-market and efficient debt management measures.

Why Maintained?

Standard Motor’s adjusted earnings per share in the 2012-third quarter went up 23.7% year over year to 73 cents, surpassing the Zacks Consensus Estimate by 9 cents. Revenues increased 16.8% to $276.0 million, ahead of the Zacks Consensus Estimate of $258.0 million, driven by the positive impact from the company’s recent acquisitions and strong performance of the company’s Temperature Control segment. Over the past four quarters, Standard Motors has delivered an average surprise of 0.33%.

Following the release of the third quarter results, the Zacks Consensus Estimate for 2012 increased 7.9% to $1.77 per share. Moreover, the Zacks Consensus Estimate for 2013 also increased 6.3% to $2.03 per share. With the Zacks Consensus Estimates for both 2012 and 2013 going up, the company retains a Zacks Rank #1 (Strong Buy).

Standard Motor benefits from its strong brand recognition and wide customer base. With a focus on the aftermarket, the company is less exposed to the cyclical automotive industry. The company will benefit from the rising demand of repair products due to the improved used vehicles market, increase in the number of automobiles on the road and rise in the average age of vehicles in the U.S.

However, the company faces challenges from concentrated customer base. The company’s top five customers include Advance Auto Parts Inc. (AAP) and O’Reilly Automotive Inc. (ORLY). These companies account for more than 10% of the company’s revenues.

Other Stocks to Consider
 
Apart from Standard Motor, other stocks that are performing well in the industry where the company operates include Tesla Motors (TSLA). It retains a Zacks Rank #2 (Buy).
 

 
ADVANCE AUTO PT (AAP): Free Stock Analysis Report
 
O REILLY AUTO (ORLY): Free Stock Analysis Report
 
STANDARD MOTOR (SMP): Free Stock Analysis Report
 
TESLA MOTORS (TSLA): Free Stock Analysis Report
 
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