Bank of America has reinstated its research coverage on the U.S. auto parts retail sector, issuing Buy ratings on both AutoZone Inc. (ticker AZO) and O'Reilly Automotive Inc. (ticker ORLY). The reinstatement follows the bank’s view that the sector benefits from an aging vehicle fleet, a less affordable new‑vehicle market, a backlog of deferred maintenance, and persistently high motor‑vehicle parts and equipment inflation that remains above 3 %. Historical performance data cited by the analysts indicate that the sector has outperformed the S&P 500 by roughly 17 % during periods when parts inflation exceeds the 3 % threshold.
The analysts highlight that the “do‑it‑for‑me” commercial segment has become the primary growth engine for leading retailers, and they expect double‑digit commercial growth to be sustainable in the near term. Both AutoZone and O'Reilly are described as leveraging their scale to capture market share with commercial accounts by improving supply‑chain capabilities and parts availability. AutoZone’s strong balance sheet is said to allow it to deploy additional cash flow into capital expenditures aimed at further building out its supply‑chain network, while O'Reilly’s similarly robust balance sheet supports ongoing investments that should enhance its ability to win commercial business and drive valuation expansion.
Bank of America’s coverage reinstatement underscores the belief that the sector’s consistent performance and strong sales growth, especially in the commercial “do‑it‑for‑me” segment, will continue to drive outsized returns for the top retailers.