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Will Rising Car Sales Buoy Genuine Parts' (GPC) Q3 Earnings?

Zacks Equity Research
·3 min read

Genuine Parts Company GPC is slated to release third-quarter 2020 results on Oct 22, before the opening bell. Higher contribution from the automotive segment — which forms bulk of the company’s revenues — is likely to offset weaker results from the industrial unit and aid Genuine Parts’ overall results in the to-be reported quarter.

(Also read: Genuine Parts to Report Q3 Earnings: What's in Store?)

Q2 Highlights for GPC’s Automotive Segment

The Automotive segment’s net sales came in at $2,495.8 million, down from $2776.2 million in the prior-year quarter. The segment’s comparable sales declined 12.6% year over year in the second quarter. The segment’s operating profit decreased to $218.9 million from the prior year’s $228.7 million. The dismal performance was due coronavirus-led shelter-in-place restrictions, low footfall in stores and supply chain disruption. Automotive segment sales fell sharply in April but started to recover in May and June on the back of higher sales volume in Europe and Australasia. 

Factors Likely to Shape Automotive Unit in Q3

With social distancing becoming the new normal, private transportation is the need of the hour. Notably, third-quarter U.S. auto sales improved sequentially. In fact, sales in September witnessed year-over-year growth. Rising demand for vehicles is expected to have bolstered the firm’s auto parts sales in the to-be-reported quarter. Increasing demand for hybrid electric cars is also driving demand for technologically superior auto parts and specific tools. Sales of used cars have also been strong, which is likely to have positively impacted the firm’s automotive segment. The company has also been strengthening e-commerce initiatives including buy-online, pickup-in-store, curbside pickup and expanded ship-to-home capabilities to spur sales.

With the gradual recovery of the economy, things have been looking up for the company’s automotive segment. The Zacks Consensus Estimate for this segment’s quarterly net sales is pegged at $3,031 million, indicating an increase from $2,790 million recorded in third-quarter 2019. On the back of higher sales and cost-cut measures undertaken by Genuine Parts, the consensus mark for the segment’s operating profit stands at $256 million, suggesting growth from the year-ago level of $222.1 million.

Overall Earnings & Revenue Projections

The Zacks Consensus Estimate for earnings for the to-be-reported quarter is pegged at $1.48 a share, implying an improvement from $1.50 posted in the prior-year quarter. The Zacks Consensus Estimate of $4.46 billion for sales indicates a decline of 12.5% on a year-over-year basis. Genuine Parts currently carries a Zacks Rank #2 (Buy).

Upcoming Releases

Ford F, which flaunts a Zacks Rank #1 (Strong Buy), is scheduled to report the upcoming results on Oct 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gentex Corporation GNTX, which currently carries a Zacks Rank of 3 (Hold), is set to announce quarterly figures on Oct 23.

Cooper Tire Rubber Company CTB, which currently sports a Zacks Rank #1, is slated to release quarterly numbers on Oct 29.

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Ford Motor Company (F) : Free Stock Analysis Report
Cooper Tire Rubber Company (CTB) : Free Stock Analysis Report
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Gentex Corporation (GNTX) : Free Stock Analysis Report
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