On Jul 11, 2014, we issued an updated research report on Genuine Parts Company (GPC). This Zacks Rank #3 (Hold) stock frequently undertakes acquisitions to expand business.
Genuine Parts delivered positive earnings surprises in 3 of the last 4 quarters, with an average beat of 3.38%.The company’s earnings per share increased 9.7% to $1.02 in the first quarter of 2014 from 93 cents reported in the year-ago quarter. The earnings surpassed the Zacks Consensus Estimate by a penny. Net income for the quarter was $157.5 million, up 9.1% from $144.4 million recorded in the year-ago quarter.
Revenues in the quarter rose 13.3% year over year to $3.63 billion, beating the Zacks Consensus Estimate of $3.59 billion. The year-over-year improvement can be attributed to the benefits from acquisitions and sales increase, partially offset by currency headwinds.
Genuine Parts has undertaken various initiatives to boost sales and earnings, such as product line expansion, penetration into new markets and cost-saving activities. Strong cash flow from operating activities enables the company to undertake repurchase activity and pursue further acquisitions.
On the flip side, rising competition and uncertainty in the macro environment remain headwinds. A sluggish demand in the Industrial and Office Products segments is challenging for Genuine Parts. Moreover, the company has been unable to introduce meaningful price hikes in its automotive business due to pressure from retailers.
For 2014, Genuine Parts expects earnings per share between $4.49 and $4.59, up from the previous expectation of $4.47 to $4.57. The company also raised the total revenue growth guidance in 2014 to 6–8% from previous projection of 5–7%.
Key Picks from the Sector
Better-ranked automobile stocks worth considering include Meritor, Inc. (MTOR), Gentex Corp. (GNTX) and China Automotive Systems Inc. (CAAS). Meritor and Gentex sport a Zacks Rank #1 (Strong Buy), while China Automotive carries a Zacks Rank #2 (Buy).