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Genuine Parts Company Disappoints in 1Q

Zacks Equity Research

Genuine Parts Company (GPC) posted earnings per share of 93 cents for the first quarter of 2013, which were flat compared with the year-ago level. With this, earnings also missed the Zacks Consensus Estimate by 6 cents per share.

Sales in the quarter grew marginally by 0.6% to $3.2 billion, which was lower than the Zacks Consensus Estimate of $3.3 billion. The marginal rise was mainly attributable to poor sales in the company’s Industrial, Electrical, and Office Products segments, slightly more than offset by improvements in the Automotive segment.

Sales in the Automotive segment grew 3.4% to $1.5 billion. The growth was mainly attributable to commercial growth and favorable impact of the Quaker City acquisition.

Sales in the Motion Industries or Industrial segment inched down 1.7% to $1.1 billion, sales in the S. P. Richards or Office Products segment declined 1.4% to $420.1 million while sales in the EIS or Electrical segment dipped 5.4% to $139.2 million.

Genuine Parts had cash and cash equivalents of $841.9 million as of Mar 31, 2013, nearly doubled from $424.4 million as of Mar 31, 2012. Long-term debt increased significantly to $914.7 million as of Mar 31, 2013 from $500.0 million as of Mar 31, 2012. Consequently, long-term debt-to-capitalization ratio deteriorated to 23.0% from 14.9% at the end of 2012-first quarter.

In the quarter, the company’s net cash flow from operations declined to $116.4 million from $172.3 million in the prior-year, due to lower profits and unfavorable changes in operating assets and liabilities. Meanwhile, capital expenditures decreased to $12.9 million from $16.9 million in the first quarter of 2012.

Genuine Parts has undertaken various initiatives to boost sales and earnings, such as product line expansion, penetration into new markets and cost-saving activities. The company relies on a diverse product portfolio for top-line and bottom-line growth.

Despite a slow start in the quarter, the company expects to report strong sales and earnings for the remainder of the year. Genuine Parts is particularly hopeful about its recent acquisition of 70% stake of Exego Group – a leading aftermarket distributor of automotive replacement parts and accessories in Australasia.

Currently, shares of Genuine Parts retain a Zacks Rank #1, which translates to a Strong Buy rating for the short term (1–3 months). Other stocks from the same industry that worth a look are Douglas Dynamics, Inc. (PLOW), Standard Motor Products Inc. (SMP) and Delphi Automotive PLC (DLPH). All of them carry a Zacks Rank #2 (Buy).

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Read the Full Research Report on DLPH

Read the Full Research Report on SMP

Read the Full Research Report on PLOW

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