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Genuine Parts (GPC) to Post Q1 Earnings: What's in Store?

Zacks Equity Research

Genuine Parts Company GPC is slated to release first-quarter 2020 results on May 6, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.15 per share on revenues of $4.61 billion.

This Atlanta-based automotive replacement parts supplier delivered stellar results in the last reported quarter on a solid Automotive segment.

Over the trailing four quarters, Genuine Parts beat estimates on two occasions for as many misses, the average negative surprise being 0.80%. This is depicted in the graph below:

Genuine Parts Company Price and Consensus

Genuine Parts Company Price and Consensus

Genuine Parts Company price-consensus-chart | Genuine Parts Company Quote

Which Way are the Estimates Headed?

Hit by the coronavirus crisis, the Zacks Consensus Estimate for Genuine Parts’ first-quarter earnings per share has been revised downward by 6 cents to $1.15 in the past 30 days. This compares unfavorably with the year-ago quarter’s $1.28 per share. The Zacks Consensus Estimate for quarterly revenues also suggests a year-over-year decrease of 2.59%.

Key Factors

Genuine Parts’ quarterly results will likely reflect positive impact of the company’s acquisitions to improve product offerings and expand geographical footprint. The acquisitions of PartsPoint and Inenco are likely to have contributed to the company’s operating margin, and consequently, the bottom line. Further, Alliance Automotive’s deal to acquire Todd Group, in a bid to expand heavy-duty parts and service offerings, bodes well.

Moreover, Genuine Parts divested its wholly-owned subsidiary S.P. Richards Canada to NovexcoInc this January in a bid to streamline the portfolio. The company is likely to have utilized the cash proceeds of this transaction in compliance with its capital-allocation strategy during the quarter under review.

However, Genuine Parts might have faced a decline in sales volumes due to industry headwinds. Heightening coronavirus fears, especially in March, are likely to have thwarted vehicle demand, in turn dampening demand for replacement parts and materials, and business products that are required to repair and maintain vehicles. Genuine Parts also withdrew its full-year guidance and suspended stock buybacks in the March-end quarter. Further, the coronavirus crisis is expected to have hurt the company’s sales due to factory closures and production shutdowns in the United States, the U.K., Europe and Canada.

Additionally, lower vehicle sales amid a weakening consumer demand and soft economic conditions are likely to have hurt quarterly revenues. Furthermore, elevated SG&A costs, unfavorable foreign-currency transactions, and rising restructuring and acquisition-related expenses are expected to have dragged margins down during the January-March period.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Genuine Parts this time around. The combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Genuine Parts has an Earnings ESP of -7.99%. This is because the Most Accurate Estimate of $1.06 per share comes in nine cents lower than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Genuine Parts carries a Zacks Rank of 3 (Hold) currently.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Axon Enterprise, Inc AAXN has an Earnings ESP of +18.31% and carries a Zacks Rank #3 currently. The company is slated to release first-quarter 2020 earnings on May 7.

The Allstate Corporation ALL is set to report quarterly numbers on May 6. The company has an Earnings ESP of +2.45% and holds a Zacks Rank of 3, at present.

Arbor Realty Trust ABR is scheduled to announce earnings figures on May 8. The stock has an Earnings ESP of +1.59% and currently carries a Zacks Rank #3.

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