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Genuine Parts Announces Acquisition for Industrial Segment

Zacks Equity Research

Genuine Parts Company GPC signed a definitive agreement to acquire Axis New England and Axis New York ("Axis"). Founded in 1994, the Danvers, MA-based automation and robotics company, Axis New England offers expertise in advanced machine automation. Also, the company provides component parts and systems to customers in the Northeast of the United States from its hub in Danvers and the other office Axis New York situated in Rochester, NY.

The new company will be added to Genuine Parts’ Industrial segment, which operates under the name Motion Industries. The segment offers industrial replacement parts and materials to customers across North America. The acquisition of Axis will aid Motion Industries to expand abilities in industrial plant floor automation. This, in turn, will expand Genuine Parts’ Industrial segment in the coming years.

The newly added company is projected to contribute $55 million in estimated annual revenues. Subject to satisfying closing conditions, the deal is expected to close by March 1, 2019.

Genuine Parts Company Price and Consensus


Genuine Parts Company Price and Consensus | Genuine Parts Company Quote

Genuine Parts is frequently undertaking investments and acquisitions to improve product offerings, and expand the geographical footprint. On Oct 1, 2018, it announced the acquisition of Hydraulic Supply Company (HSC) that offers a broad range of hydraulic, pneumatic and industrial components, and systems. The acquisition strengthened Motion Industries’ fluid power product range.

In most of 2018, Genuine Parts’ Industrial segment witnessed a consistently strong market, similar to 2017. A strong sales environment across the United States, Canada and Mexico resulted in sales rise of 8.3% year over year to $1.6 million in third-quarter 2018. Further, the company’s plan to pursue both core and acquisitive growth is expected to drive the segment’s performance in the quarters ahead. However, an inflationary pricing environment might hurt margins in the months ahead.

Apart from the Industrial segment, two other operating segments of Genuine Parts’ are Automotive and Business Products. In third-quarter 2018, these segments’ net sales rose 23.3% and 1.3%, respectively.

With growth plans, market conditions and announced acquisitions, in 2018, the company expects to witness sales growth of 14-15% from the prior year while adjusted earnings per share are expected to be $5.6-$5.70. This Atlanta, GA-based replacement parts supplier is scheduled to report fourth-quarter and 2018 earnings on Feb 20.

Over the past three months, shares of Genuine Parts have outperformed the industry it belongs to. During the period, shares of the company have gained 5.9% while the industry increased 3.7%.


Zacks Rank & Stocks to Consider

Genuine Parts currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are AB Volvo VLVLY, Oshkosh Corporation OSK, and Ferrari N.V. RACE.  Volvo currently carries a Zacks Rank #2 (Buy) while Oshkosh and Ferrari sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Volvo has an expected long-term growth rate of 5%. Share price of the company has increased 5.7% in the past three months.

Oshkosh has an expected long-term growth rate of 11.3%. Shares of the company have gained 19.2% in the past three months.

Ferrari has an expected long-term growth rate of 18.5%. Over the past three months, shares of the company have gained 15.8%.

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