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Why Is Genuine Parts (GPC) Down 8% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Genuine Parts (GPC). Shares have lost about 8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Genuine Parts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Genuine Parts Q2 Earnings and Revenues Miss Estimates

Genuine Parts has reported adjusted earnings of $1.57 per share in second-quarter 2019, whereas it recorded $1.59 in the prior-year quarter. Its earnings missed the Zacks Consensus Estimate of $1.67 in the reported quarter.

The company recorded net income of $224.4 million in second-quarter 2019, down from $227 million in the prior-year quarter.

Genuine Parts reported net sales of $4.93 billion, up 2.3% year over year. The figure missed the Zacks Consensus Estimate of $5 billion. Net sales included 1.6% comparable growth, roughly 2.7% from acquisitions, partly offset by 1.5% adverse impact of foreign currency translation and 0.5% attributable to the sale of Grupo Auto Todo in first-quarter 2019.

Operating profit decreased to $385.6 million from $390.2 million in second-quarter 2018. Selling, administrative and other expenses rose to $1.22 billion from $1.15 billion a year ago.

Segmental Results

The Automotive segment’s net sales improved to $2.77 billion from the year-ago figure of $2.74 billion. However, the segment’s operating profit declined to $228.4 million in the reported quarter from $243.6 million a year ago.

The Industrial Parts segment’s net sales rose to $1.68 billion from $1.6 billion in the year-ago quarter. Moreover, operating profit increased to $136.3 million from $125.2 million in the year-ago quarter.

The Business Products segment’s net sales fell to $477.7 million from $483.2 million recorded in the prior-year quarter. Operating profit for the segment declined to $20.9 million from $21.4 million recorded in the prior-year quarter.

Financial Position

Genuine Parts had cash and cash equivalents of $562.6 million as of Jun 30, 2019, up from $355.1 million as of Jun 30, 2018. As of Jun 30, 2019, long-term debt increased to $2.9 billion from $2.5 billion as of Jun 30, 2018.

Guidance

In 2019, Genuine Parts expects sales to rise 4.5-5.5%. The company expects adjusted earnings per share to be $5.65 to $5.75 down from $5.81-$5.96 in the prior quarter.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Genuine Parts has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Genuine Parts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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