Shares of O'Reilly Automotive are tumbling on Monday, following reports that the auto parts retailer is interested in purchasing Genuine Parts Co.'s NAPA division. Even bulls see the potential deal as more of a speed bump than a green light.

Just before the holiday weekend, Bloomberg reported that O'Reilly may be willing to spend $10 billion or more in a cash bid for the auto parts arm of Genuine Parts. The news comes after Genuine Parts announced in February that it would split the company, breaking up the automotive and industrial sides of the business in the first quarter of 2027. O'Reilly did not return requests for comment.

Shares of O'Reilly are down 6.2% in early Monday trading following the news, on pace for their lowest close since January 2025, and its largest percentage decrease since May 2022.

Even analysts, a normally optimistic bunch, are concerned about various aspects of a potential deal.

Right now there aren't enough details to know whether or not the combination would make sense, as UBS analyst Michael Lasser writes, aside from trusting that O'Reilly, a previously disciplined buyer, wouldn't overpay.

Yet it's worth noting that UBS data show that 60% of NAPA's U.S. stores had an O'Reilly within a 10 minute drive.

"This would mean that O'Reilly would need to close a considerable amount of stores," Lasser writes. "Additionally, it's not clear how the Federal Trade Commission would look at this combination given the amount of store overlap." Then add in the fact that NAPA only runs about a third of its stores, the rest managed by independent operators--a dual approach that wouldn't be easy to navigate and "would complicate the investment case for O'Reilly."

On the plus side, he admits that it would give O'Reilly a presence in Europe, Australia and Asia.

"But we don't think O'Reilly wants to operate outside of North America?" writes TD Cowen analyst Max Rakhlenko.

His back-of-the-envelope math suggests the deal could be accretive but comes with "significant strategy/operational questions and hurdles," at a time when O'Reilly, in its current form, is already taking outsize market share without the added risk.

"O'Reilly operates a very different biz compared to NAPA," he notes, and the company "hasn't made a large acquisition since 2008," further complicating the picture.

Moreover, NAPA has "struggled for years" due to its franchisee structure and supply chain underinvestment, notes Wolfe Research's Spencer Hanus.

That means NAPA would benefit from O'Reilly's top-notch distribution network "but it would be complex and require a material capital expenditure step up (there isn't enough excess capacity in the O'Reilly network to absorb this). While we see potential long-term benefits, the size/complexity of a deal could be a challenge," Hanus said.

Even assuming all goes well, others expect digesting NAPA would require shareholder patience too. Using his 2026 estimates, Raymond James analyst Bobby Griffin sees a combined company "still below 25% market share on both a total market and 'do it for me' basis, using O'Reilly's total addressable market framework."

He thinks the deal (after a "difficult" regulatory approval process) could be "mildly accretive" in 2027 before synergies kick in. "Post synergies, we estimate high-teens percentage accretion to our standalone O'Reilly earnings per share estimate in 2029 ."

Of course, all of these estimates would be reworked if talks are confirmed, with actual figures, which could make the strategic rationale clearer to O'Reilly investors. For now however, it's easy to understand why so many are pumping the brakes.

Write to Teresa Rivas at teresa.rivas@barrons.com

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July 06, 2026 12:26 ET (16:26 GMT)

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