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3 Automotive Parts Makers Growing at Double-Digit Rates

Photo of a collection of auto parts. 3 Auto Parts Makers Achieving Double-Digit Growth.

Key Points

  • As the automotive industry sets up for a potential comeback, three stocks could give investors double-digit EPS growth and upside through price targets. 
  • Being the first to get paid in the industry's value chain, these OEM names have analysts jumping all over them. 
  • Despite trading well below their 52-week lows, P/E ratios show markets are placing a premium quality on the future.

The latest ISM manufacturing PMI index suggests that the turning point for the automotive stock sector is imminent. According to the report, a member of the primary metals industry was quoted as saying that "automotive builds continue at averages but not near maximum outputs." This could translate to there being a long runway for the industry to catch up. 

This sector is home to large household names like CarMax Inc. NYSE: KMX and Ford Motor NYSE: F. However, playing the value chain is often a better way to express a view for an industry, which is why original equipment manufacturers (OEMs) and other parts makers could be a more attractive growth strategy. 

To ride this wave, investors could consider companies like Visteon Co. NASDAQ: VC, Driven Brands Holdings Inc. NASDAQ: DRVN, and LCI Industries NYSE: LCII as analysts are projecting double-digit earnings per share (EPS) growth. 

More Tailwinds Than Meet the Eye

The U.S. economy is now at a diverging pivotal point propelled by the two most important sectors that drive gross domestic product (GDP) growth: services and manufacturing.

According to the ISM Services PMI index, the services sector has been responsible for driving economic growth for over a year and a half, but that changes today. After contracting for nearly 18 months, the manufacturing sector expanded in March and then again in April. Analysts at Goldman Sachs think further — and sustained — expansion will follow in 2024. 


Because of this, the prices of steel and aluminum (the main components in OEMs) rose last month. Steel prices rallied from $3,330 to $3,600 in April alone, a near 10% increase that indicates growing demand for these commodities, likely spurred by automotive demand. 

With the Federal Reserve (the Fed) looking to cut rates this year, financing a new car could become more accessible for consumers, so these manufacturers are stocking up on the raw material needed to meet this potential future demand. 

3 Stocks That Could Rally

How can investors know if it’s not too late to enter this wave? Price action is a great place to start. Aside from price action, investors can gauge the market’s sentiment regarding EPS projections by comparing current forward P/E valuations against peers. Investors should look for a premium valuation, as stocks typically trade at more expensive multiples for a good reason. 

All three of these stocks trade below 80% of their 52-week high, which fits the Wall Street definition of a bear market: a 20% or more retracement from recent highs. Knowing this, analysts feel a lot more comfortable making bold predictions, as the upside gaps to be filled are more prominent now. 

1. Visteon

Visteon Today

Visteon Co. stock logo
VCVC 90-day performance
Visteon
$110.97
+4.60 (+4.32%)
(As of 11:46 AM ET)
52-Week Range
$101.42
$159.06
P/E Ratio
6.34
Price Target
$133.17

Visteon analysts think the stock’s EPS could grow by 23.8% this year, above the automotive industry’s average expected 16%. Because of this projected outperformance, analysts at JPMorgan Chase decided to value the stock at $145 a share, or 25% higher than today’s prices. 

Visteon stock trades at a forward P/E ratio of 11x over the industry’s average valuation of 10x. While only a 10% premium, the market is still justifying the stock’s EPS growth projections and price targets. 

2. Driven Brands

Driven Brands Today

Driven Brands Holdings Inc. stock logo
DRVNDRVN 90-day performance
Driven Brands
$12.96
+0.21 (+1.65%)
(As of 11:51 AM ET)
52-Week Range
$10.59
$26.30
Price Target
$17.25

Driven Brands analysts see up to 30.7% EPS growth in the next 12 months, again beating the industry’s 16% average. Showing double-digit growth during an uncertain economic cycle, price targets reflect this added premium. Driven Brands could rally by 55.5% according to its $17.9 a share target

Driven Brands becomes an outlier through its 12.5x valuation, bringing a 25% premium to boost future sentiment toward these projections and price targets. 

3. LCI Industries

LCI Industries Today

LCI Industries stock logo
LCIILCII 90-day performance
LCI Industries
$109.93
+4.36 (+4.13%)
(As of 11:45 AM ET)
52-Week Range
$96.18
$137.07
Dividend Yield
3.82%
P/E Ratio
29.87
Price Target
$109.00

LCI Industries will beat the industry again this year with its 26.6% EPS growth projections. Unlike its peers, today’s price targets actually reflect a single-digit downside. However, the stock’s 90% institutional ownership would give investors another leg to stand on. Among these institutional owners, Vanguard and PNC Financial Services decided to boost their stakes in LCI by 0.4% and 2.1%, respectively, in the past quarter. 

Of these three stocks, the valuation leader is LCI Industries, whose 15x valuation calls for up to 50% premium to its peers. 

The Market’s Take

Trading so low relative to their 52-week highs and still commanding premium valuations based on future projections, these stocks could fit the profile for investors looking for double-digit growth in one of the industries that may provide stability during uncertain economic times that could come for the second half of the year.

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Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Value Stocks, Asian Markets, Macro Economics

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
CarMax (KMX)
3.0796 of 5 stars
3.08 / 5 stars
$81.78+2.4%N/A31.95Hold$76.25
Ford Motor (F)
3.4489 of 5 stars
3.45 / 5 stars
$11.44-16.3%5.24%11.79Hold$14.18
Visteon (VC)
4.8832 of 5 stars
4.88 / 5 stars
$111.63+4.9%N/A6.38Moderate Buy$133.17
Driven Brands (DRVN)
4.4821 of 5 stars
4.48 / 5 stars
$12.98+1.8%N/A-2.79Hold$17.25
LCI Industries (LCII)
3.1679 of 5 stars
3.17 / 5 stars
$110.00+4.2%3.82%29.89Hold$109.00
The Goldman Sachs Group (GS)
4.8115 of 5 stars
4.81 / 5 stars
$490.81+0.8%2.24%19.16Moderate Buy$484.59
JPMorgan Chase & Co. (JPM)
4.4907 of 5 stars
4.49 / 5 stars
$208.80+0.1%2.20%11.65Moderate Buy$202.89
The PNC Financial Services Group (PNC)
4.8269 of 5 stars
4.83 / 5 stars
$180.46+1.7%3.55%15.15Hold$175.34
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