Genuine Parts Company (GPC) reported earnings of $1.28 per share in second quarter 2014 surpassing the Zacks Consensus Estimate by 3 cents. Earnings were up 9.4% from adjusted earnings of $1.17 in the comparable quarter of the previous year. Earnings per share of second-quarter of 2013 have been adjusted to exclude the impact of the acquisition of 70% interest in GPC Asia Pacific and lower tax rate for the re-measurement.
Genuine Parts recorded profits of $197.7 million or $1.28 per share in the second quarter of 2014 compared with $216.4 million or $1.39 in the year-ago quarter.
Revenues in the quarter rose 6.3% year over year to $3.91 billion, marginally beating the Zacks Consensus Estimate of $3.84 billion. The year-over-year improvement can be attributed to benefits from acquisitions and increased sales, partially offset by currency headwinds. Revenues also benefited from improved performance by all the reporting segments.
Operating profit increased 10.2% to $349.8 million from $317.3 million in the second quarter of 2014. Selling, general and administrative expenses rose 10.4% to $832.2 million from $753.5 million a year ago.
Revenues in the Automotive Parts segment grew 4.9% to $2.1 billion. The upside was driven by benefits from the improved performance, partially marred by a negative currency effect. The segment’s operating profit augmented 10.9% to $206.7 million in the quarter from $186.4 million a year ago.
Revenues in the Motion Industries or Industrial segment went up 6.8% to $1.2 billion on benefits from acquisitions and better performance. S. P. Richards or Office Products segment revenues rose 4.1% to $418.8 million on the back of synergies from acquisitions and overall improved performance. Electrical segment or EIS segment revenues surged 31.5% to $188 million. The upside in revenues at the EIS segment can be attributed to favorable impacts from acquisitions.
Operating profits at the Motion Industries or Industrial segment soared 7.4% to $95.4 million. Meanwhile, operating profits at the S. P. Richards or Office Products segment increased 4.8% to $31.2 million from $29.8 million a year ago. In the Electrical segment or EIS segment, operating profit grew 34.7% to $16.5 million in the quarter.
Financial Position
Genuine Parts had cash and cash equivalents of $152.9 million as of Jun 30, 2014, substantially down from $196.8 million as of Jun 30, 2013. Long-term debt decreased to $806.4 million as of Jun 30, 2014, from $900.1 million as of Jun 30, 2013.
During the first half of 2014, Genuine Parts’ net cash flow from operations dropped to $367.1 million from $467.1 million in the same period last year. Capital expenditures decreased to $39.9 million from $50.8 million in the same period of 2013.
Our Take
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-line and bottom-line growth. Genuine Parts is also actively undertaking acquisitions to expand business.
Genuine Parts Company is a prominent player in the automotive replacement parts industry and currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the same industry are China Automotive Systems Inc. (CAAS), Magna International Inc. (MGA) and Meritor, Inc. (MTOR), all of which sport a Zacks Rank #1 (Strong Buy).
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