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What's in Store for Genuine Parts (GPC) in Q1 Earnings?

Zacks Equity Research

Genuine Parts Company GPC is set to report first-quarter 2019 results on Apr 18, before the opening bell.

In the last reported quarter, the company delivered an earnings beat of 2.27%. Over the trailing four quarters, it surpassed estimates twice while missed the other two, the average surprise being negative 0.07%.

In the past three months, shares of Genuine Parts have outperformed the industry it belongs to. The stock gained 17.5% compared with 14.2% increase recorded by the industry.

Genuine Parts Company Price and EPS Surprise

 

Genuine Parts Company Price and EPS Surprise | Genuine Parts Company Quote

Let’s see, how things have shaped up for the upcoming announcement.

Factors Influencing This Quarter

Genuine Parts regularly undertakes acquisitions to improve product offerings and expand the geographical footprint. In February, the company announced about the acquisition of Axis New England and Axis New York, which, after completion, will be added to the Industrial segment.

Apart from ongoing acquisition reports, Genuine Parts’ acquisition of Alliance Automotive Group (“AAG”) in November 2018 is reaping strong sales and operational results. In order to keep growing in Europe, its subsidiary, AAG is undertaking frequent acquisitions that are expected to favorably impact sales across Europe. In March, AAG entered an agreement to acquire PartsPoint Group. The to-be-acquired company deals with automotive aftermarket parts and accessories, with presence across Netherlands and Belgium.

Further, solid execution of sales initiatives, sound fundamentals for the aftermarket and favorable weather conditions are projected to bode well for the automotive parts business.

However, the presence in countries outside the United States makes Genuine Parts vulnerable to the negative impact of foreign currency translation. Also, increasing debt majorly due to acquisitions is a concern for the company.

Further, tight labor market, wages and payroll, along with rising operating costs, are hampering the company’s gross margin. However, in order to combat increasing operational costs, it is taking steps to accelerate the integration of acquisitions and investments in order to improve productivity and supply chains across global operations.

Earnings Whispers

Our proven model does not conclusively predict that Genuine Parts is likely to beat on earnings this quarter. This is because, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Genuine Parts has an Earnings ESP of -0.95% as the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $1.30 and $1.31, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, this, combined with a negative Earnings ESP, makes a surprise prediction difficult. Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few auto stocks worth considering, comprising the right combination of elements to deliver an earnings beat this time around:

General Motors Company GM has an Earnings ESP of +5.61% and it is a #3 Ranked player. Its first-quarter 2019 results are slated to release on Apr 30.

You can see the complete list of today’s Zacks #1 Rank stocks here.

PACCAR Inc. PCAR has an Earnings ESP of +1.36% and it currently carries a Zacks Rank of 3. Its first-quarter 2019 results are scheduled to release on Apr 30.

Peer Release

On Mar 29, CarMax, Inc. KMX announced fourth-quarter fiscal 2019 earnings. In the reported quarter, the company posted net earnings per share of $1.13 while net sales and operating revenues were $4.32 billion. Currently carrying a Zacks Rank of 3, the quarterly figures for the company surpassed the respective Zacks Consensus Estimate.

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