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Standard Motor (SMP) Acquires Stoneridge's Sensor Business

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Zacks Equity Research
·3 min read
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Standard Motor Products Inc. SMP recently announced the acquisition of certain assets and liabilities of the particulate matter sensor business of Stoneridge Inc. Notably, Stoneridge’s particulate matter sensor business generates annual revenues of $12-14 million with manufacturing facilities in Lexington, OH and Tallin in Estonia.

Standard Motor will be relocating all production to its existing locations, and is not acquiring any of Stoneridge’s locations or employees. It is expected that the business will be fully integrated within upcoming 12 months.

The buyout of the particulate matter sensor product line from Stoneridge gives Standard Motor access to advanced emissions control technology used in commercial vehicles. Importantly, this technology is a perfect fit for Standard Motor’s strategy of expansion into the original equipment heavy duty market.

Long Island City, NY-based Standard Motor was founded in 1919 and is one of the leading manufacturers, distributors, and marketers of premium automotive replacement parts for engine management and temperature control systems. It primarily focuses on heavy-duty industrial and the original equipment (OE) market.

The company’s Pollak business buyout has enhanced its growth opportunities in OE, heavy duty and commercial vehicle markets, aftermarket distribution, product management, and service areas. Moreover, the company enjoys a strong competitive advantage courtesy of brand recognition and sizeable customer base.

The company reported robust results for fourth-quarter 2020, with adjusted earnings of $1.08 per share on total revenues of $283 million.

However, the automotive aftermarket is highly competitive and Standard Motor faces tough competition in every market it serves. Also, with the technology shift in full swing, equipment manufacturing companies have to develop and upgrade their offerings to remain on par with the evolving trends in the automotive market. The new features and component designs call for abundant capital, time and labor, in turn, resulting in high R&D spending. This is likely to result in high operating costs for the company.

Standard Motor, peers of which include Dorman Products DORM, Genuine Parts Company GPC and LKQ Corporation LKQ, currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have appreciated 9.4% year to date, compared with the industry’s growth of 12.4%.

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