America’s carmakers are in such bad shape that a share of General Motors now costs about as much as a slice of pizza. Car-parts makers aren’t any better off, with several operating under bankruptcy protection. But plunging car sales, it turns out, aren’t such a drag for another side of the industry: parts retailers.

Instead of buying new cars, Americans seem to be squeezing more miles out of vehicles in their garage. The median age of cars hit a record high of 9.4 years in 2008, according to R.L. Polk & Co. With folks trying to save money in a rough economy, car owners are doing more routine repairs themselves, says Polk consultant Dave Goebel. And that’s boosting demand for parts – along with sales for the big retail-parts chains.

Question is, how to invest. The three largest chains – AutoZone, O’Reilly Automotive and Advance Auto Parts – have all seen their stocks rise sharply since last fall. The sector is now priced at a 15 percent premium to that of other retailers, says David Schick, an analyst with Stifel Nicolaus. There’s still a good chance the parts retailers will beat earnings estimates, he says, since America’s carmakers are in such bad shape that a share of General Motors now costs about as much as a slice of pizza. Car-parts makers aren’t any better off, with several operating under bankruptcy protection. But plunging car sales, it turns out, aren’t such a drag for another side of the industry: parts retailers.

Instead of buying new cars, Americans seem to be squeezing more miles out of vehicles in their garage. The median age of cars hit a record high of 9.4 years in 2008, according to R.L. Polk & Co. With folks trying to save money in a rough economy, car owners are doing more routine repairs themselves, says Polk consultant Dave Goebel. And that’s boosting demand for parts – along with sales for the big retail-parts chains.

Question is, how to invest. The three largest chains – AutoZone, O’Reilly Automotive and Advance Auto Parts – have all seen their stocks rise sharply since last fall. The sector is now priced at a 15 percent premium to that of other retailers, says David Schick, an analyst with Stifel Nicolaus. There’s still a good chance the parts retailers will beat earnings estimates, he says, since the “pendulum is swinging in their favor.”

But the stocks may not have much room left to pop. Rising unemployment is usually a sign that parts sales are about to slow down, says analyst Jaison Blair of Rochdale Securities. With job losses accelerating, he thinks the bulls are overstating the case for parts demand. At $37 a share, he argues that O’Reilly is now “priced for perfection.” And even Schick, who’s generally bullish on the sector, has a “hold” on AutoZone, whose stock has nearly doubled over the past year and recently hit record highs of $162 a share.

If there’s a value play, say analysts, it’s Advance Auto Parts, a chain with more than 3,300 stores in 40 states. A new management team took over a year ago, and its turnaround efforts are starting to bear fruit, says BB&T Capital Markets analyst Anthony Cristello. The team is replacing stale inventory with faster-moving products, beefing up sales to corporate customers and closing unprofitable stores. Still, Wall Street expects Advance’s 2009 earnings to be up a modest 4 percent, and Cristello warns that higher profit growth won’t happen overnight.

THREE TO WATCH

Advance Auto Parts

Advance is in turnaround mode, improving its merchandise mix and closing unprofitable stores.

AutoZone

With more than 4,200 stores, it’s the nation’s largest parts chain and a money machine. But analysts say it may not have much pop left.

O’Reilly Automotive

The Midwestern chain bought a big rival last year, and sales and profits are rising. Consider buying if share prices dip.

Copyright The New York Times Syndicate