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Genuine Parts (GPC) to Boost Scale & Profits With KDG Buyout

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Genuine Parts Company GPC is set to acquire Kaman Distribution Group (“KDG”) in a $1.3-billion, all-cash deal. Based in Bloomfield, KDG is a power transmission, automation, and fluid power industrial distributor and solutions provider. With a headcount of around 17,000, the company operates across the United States and serves more than 5,000 customers. Subject to satisfactory closing conditions, the deal is set for closure in first-quarter 2022.

The buyout is expected to bolster Genuine Parts’ scale and market position, while creating fresh opportunities for long-term growth, profits, and cash flow. It should be noted that KDG is expected to generate sales of $1.1 billion next year. Genuine Parts anticipates the buyout to be accretive to earnings in the first year after closing of the transaction and achieve $50-million annual run-rate synergies over three years. The expected leverage at the completion of the transaction is ~2x. The deal will be financed at closing via an existing revolver and accounts receivable sales agreement. GPC is expected to maintain liquidity of more than $2 billion.

Genuine Parts frequently undertakes strategic acquisitions to improve product offerings and expand its geographical footprint. The acquisitions of PartsPoint and Alliance Automotive Group have bolstered the company’s growth. The buyouts of Axis New England and Axis New York are also fueling Genuine Parts’ Industrial Parts Group. The acquisition of Inneco has expanded the industrial footprint of Genuine Parts to Australasia. Other strategic bolt-on acquisitions including Winparts, Rare Spares, and PARts DB have enhanced Genuine Parts' growth and capabilities.

In the last reported quarter, GPC not just delivered a comprehensive beat but also recorded higher year-over-year revenues and earnings. Encouraged by solid results, the company raised its full-year 2021 guidance. It currently projects revenues from automotive and industrial sales to witness a year-over-year uptick of 14-15% and 10-11% versus the prior guided range of 11-13% and 6-8%, respectively. Full-year adjusted earnings per share are envisioned in the band of $6.60-$6.65, higher than the prior forecast of $6.20-$6.35. Free cash flow is now projected in the band of $950 million to $1.15 billion, up from the previous forecast of $900 million to $1.1 billion.

Shares of GPC have risen 35.4% on a year-to-date basis. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 Solid Picks from the Auto Space

Investors interested in the auto sector can consider betting on Tesla TSLA, Harley-Davidson HOG and Goodyear Tire GT for handsome gains. Each of the stocks currently flaunts a Zacks Rank #1.

Goodyear has an expected earnings growth rate of 196.86% for the current year. The Zacks Consensus Estimate for its earnings for the current year has been revised upward by 80 cents over the past 60 days.

Goodyear beat the Zacks Consensus Estimate for earnings in the last four quarters. GT has a trailing four-quarter earnings surprise of 228.5%, on average. Its shares have rallied 80.7% year to date.

Tesla has an expected earnings growth rate of 166.9% for the current year. The Zacks Consensus Estimate for its earnings for the current year has been revised upward by 62 cents over the past 60 days.

Tesla beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. TSLA has a trailing four-quarter earnings surprise of 25.4%, on average. Its shares have increased 31.4% year to date.

Harley-Davidson has an expected earnings growth rate of 34.9% for the current quarter. The Zacks Consensus Estimate for its earnings for the current year has been revised upward by 32 cents over the past 60 days.

Harley-Davidson beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once, with a trailing four-quarter negative earnings surprise of 138.5%, on average. Its shares have inched up 1% year to date.


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Genuine Parts Company (GPC) : Free Stock Analysis Report
 
HarleyDavidson, Inc. (HOG) : Free Stock Analysis Report
 
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