3 Original Auto Equipment Stocks to Consider Amid Weakening Demand

Why It Matters

Even as overall OEM output contracts, firms that combine automation‑driven cost advantages with diversified product lines can capture aftermarket growth and deliver outsized earnings momentum. Investors seeking exposure to the automotive supply chain should focus on companies that can thrive despite near‑term production headwinds.

Key Takeaways

• Garrett Motion leads global turbocharger market with strong tech portfolio
• PHINIA's diversified platform reduces reliance on any single customer
• LCI Industries expands RV aftermarket after acquiring Leveltron assets
• Automation boosts OEM efficiency, offsetting labor cost pressures
• Industry EV/EBITDA at 18.33×, modestly above S&P 500

Pulse Analysis

The original‑equipment segment is at a crossroads. Automation technologies—ranging from advanced robotics to AI‑driven quality control—are reshaping how OEMs build both internal‑combustion and electric powertrains. By cutting labor costs and accelerating cycle times, these tools help manufacturers offset the higher material and financing expenses that have eroded margins in recent years. However, the sector still feels the pull of weaker vehicle demand, driven by geopolitical uncertainty, rising oil prices, and a slower‑than‑expected EV rollout, prompting analysts to downgrade North American production forecasts for 2026 and 2027.

Within this environment, Garrett Motion, PHINIA and LCI Industries stand out. Garrett Motion’s turbocharging expertise and high‑speed electric‑motor solutions have secured new program awards, translating into a projected 5.7% sales growth and 20.4% EPS growth for 2026. PHINIA leverages a globally diversified component portfolio that enhances fuel efficiency across combustion and hybrid platforms, forecasting 6.6% sales growth and a robust 28.2% EPS increase. LCI Industries, after acquiring Leveltron’s hydraulic assets, is positioned to capture rising RV‑aftermarket spend, with expected 3.6% sales growth and 20% EPS growth. All three maintain a Zacks Rank of #2 (Buy) and have delivered average earnings surprises exceeding 16%.

For investors, the key takeaway is that selective exposure to automation‑enabled OEM suppliers can mitigate the broader industry’s downside risk. The sector’s EV/EBITDA multiple of 18.33× suggests modest valuation premium relative to the broader market, while the bottom‑quartile Zacks industry rank underscores near‑term earnings pressure. Companies that combine strong R&D pipelines, diversified end‑markets, and proven earnings beat records are likely to outperform as the automotive landscape transitions toward electrification and higher‑value aftermarket services.