On Mar 12, 2014, we issued an updated research report on Genuine Parts Company (GPC). The company has positive factors like improving earnings, rising cash flow, benefits from acquisitions and efficient capital deployment. However, headwinds include sluggish demand in the Industrial and Office Products segments, rising competition and uncertainty in the macro environment.
Genuine Parts Company’s earnings per share increased 4.3% year over year to 97 cents in the fourth quarter of 2013 from 93 cents reported in the year-ago quarter (including a one-time pension gain of 10 cents per share). Earnings surpassed the Zacks Consensus Estimate of 92 cents per share.
Revenues in the quarter grew 12.8% to $3.5 billion, in line with the Zacks Consensus Estimate. The year-over-year improvement in revenues can be attributed to benefits from acquisitions, partially offset by headwinds from currency translations.
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- and bottom-line growth.
However, weak customer demand in the equipment and machinery business offset the growth in food products, automotive, pulp and paper as well as lumber and wood products businesses in the Industrial segment. Demand in the Office Products segment fell in 2013 due to high unemployment and increasing digitization of offices, which reduced demand for paper-based office products.
Genuine Parts reported positive earnings surprises in two of the trailing four quarters with an average beat of 1.61%. The Zacks Consensus estimate for the company’s 2014 earnings is $4.57 per share, up 3.78% over 2013.
Genuine Parts Company is a prominent player in the automotive replacement parts industry with a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the automotive replacement industry are Remy International, Inc. (REMY), Motorcar Parts of America Inc. (MPAA) and LKQ Corp. (LKQ). Remy and Motorcar Parts sport a Zacks Rank #1 (Strong Buy) while LKQ carries a Zacks Rank #2 (Buy).