Cold Weather Implications For Auto Sales

Failure-related auto part sales in 2017 should be driven by “a cold December and normalizing winter weather trends,” while an analysis of the 2011–2012 weather trends suggests “better comps ahead,” Wedbush’s Seth Basham said in a report.

Weather-Related Sales To Increase Through 2017

Basham believes the year-over-year drop in temperatures in December and forecasts for continued year-over-year declines for the rest of the winter months suggest an accelerated rate of part failure and duress, which should benefit the industry sales for “multiple quarters to come.”

The weather pattern over the past year and a half is similar to the trends witnessed in the 2011–2012 period, “when mild winter weather weighed on industry comps until normal winter weather returned in 2012–2013 and comps rebounded sharply,” Basham elaborated.

The analyst expects DIY auto stocks to outperform “in anticipation of improved trends,” while naming the top DIY auto picks as Advance Auto Parts, Inc. AAP (Rated: Outperform), O'Reilly Automotive Inc ORLY (Rated: Outperform), AutoZone, Inc. AZO (Rated: Outperform) and Genuine Parts Company GPC (Rated: Neutral). Basham noted further that these were the most “weather-sensitive” stocks.

The underlying industry trends continue to be favorable, “highlighted by continued increases in miles driven,” the Wedbush report added.