Genuine Parts Company (GPC) is set to report third-quarter 2014 results on Oct 20. Last quarter, the company posted a positive surprise of 2.40%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Genuine Parts is likely to beat earnings this season because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.81%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Genuine Parts currently carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank of #1, #2 or #3 have a significantly higher chance of beating earnings. Conversely, sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
Genuine Parts’ Zacks Rank #2 and ESP of +0.81% make us reasonably confident of a positive earnings beat.
What is Driving the Better-than-Expected Earnings?
Genuine Parts has been undertaking 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. Genuine Parts is also actively undertaking acquisitions to expand business. For 2014, the company expects total revenue growth in the range of 7–8% and earnings per share between $4.54 and $4.60.
Genuine Parts also boasts a strong capital position which enhances shareholders’ value through frequent share repurchases and dividend payouts. In the first half of 2014, the company repurchased approximately 635,000 shares and had about 10 million shares authorized and available for repurchase. Moreover, the company raised its quarterly dividend for the 58th consecutive year in Feb 2014.
Stocks to Consider
Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
PACCAR Inc. (PCAR) has an earnings ESP of +1.04% and a Zacks Rank #3 (Hold). PACCAR will be reporting third-quarter 2014 earnings on Oct 28.
Meritor, Inc. (MTOR) has an earnings ESP of +37.5% and a Zacks Rank #3. The company will be announcing third-quarter numbers on Nov 12.
Advance Auto Parts Inc. (AAP) has an earnings ESP of +0.54% and a Zacks Rank #2. The company’s third-quarter financial results are scheduled to release on Nov 6.
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