Written by Allen Caron
Recent news that the US automotive market is recovering may be good news for aftermarket manufacturers. New car sales are returning to pre-slump levels, driven largely by consumer spending from older demographics who are purchasing new vehicles. Positive results in the automotive industry tend to be helpful for both upstream and downstream companies as well, as we explained in our last article on the topic.
The automotive aftermarket includes both replacement parts and add-ons to existing vehicles, as well as automotive services. Growth in the automotive industry could help the aftermarket industry continue to thrive.
Motorcar Parts of America, Inc. (NASDAQ:MPAA), based in Torrance, CA, creates remanufactured and new starters, alternators, wheel hub assemblies and bearings. The company has a portfolio of brands, ranging from Pure Energy, a premium line, to X-Amps, the first LED-lit alternators. Although the company announced on June 10th that they expected their separately capitalized subsidiaries to file for bankruptcy, the company seems to be doing well in Q3. MPAA closed September 16th at $10.11, up $0.14, with a market cap of $146.63 million. Their 52-week trading range is $4.22 - $10.34.
Another company operating in the automotive aftermarket space is Milwaukee, WI-based Strattec Security Corp. (NASDAQ:STRT). They produce automotive locks and keys as well as other access control products, like power lift doors and latches. The company is also a major OEM provider for many major car manufacturers. Strattec has declared two cash dividends for investors in the last 12 months, with the most recent one reaching investors at the end of September. STRT closed September 16th at $38.76, up $0.21, with a market cap of $129.11 million. Their 52-week trading range is $20.78 - $42.30.
Cleveland, OH-based Hickok Incorporated (OTCMKTS:HICKA) provides diagnostic testing equipment for automobiles. Offering "dealer-level diagnostics", their products include the NGS PC Software Solutions Kits, which provide access to on-board diagnostics, and the ABS Sensor Pinpoint Tester, which allows service technicians to verify wheel speed quickly. The company also sells sensors and gauges to the aircraft and locomotive industries. HICKA was last traded on August 30th at $2.09, with a market cap of $3.42 million. Their 52-week trading range is $1.02 - $2.50.
Each car produced and sold by automotive manufacturers creates more aftermarket opportunities. Older Americans' spending patterns are returning to baseline levels, and even young adults are buying more cars than they did last year.
Taking into account these demographic trends, along with a lineup of innovative manufacturers claiming their space in the market, customization and aftermarket replacement parts may well thrive in coming years.
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