On Dec 24, 2014, shares of Genuine Parts Company (GPC) reached a 52-week high of $108.11, before eventually closing at $107.62. The closing price represents a year-to-date return of 34.8%.
Share Price Drivers
Increase in the miles driven by Americans due to declining gas price is giving a boost to auto parts retailers and suppliers including Genuine Parts. The increase in miles traveled results in rise in the wear and tear of vehicles. This has lead to hike in demand for maintenance parts, replacement parts and automotive service.
Genuine Parts reported earnings of $1.24 per share in third-quarter 2014, surpassing the Zacks Consensus Estimate by a penny. Earnings were up 10.7% from adjusted earnings of $1.12 in the year-ago comparable quarter. Revenues in the quarter rose 8.2% year over year to $3.99 billion, marginally beating the Zacks Consensus Estimate of $3.96 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.
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 raised the total revenue growth guidance for fiscal 2014 to 8%. It also plans to focus on seeking opportunities to expand margins. For 2014, margins are expected to stand at 30% and gradually increase in 2015. For fiscal 2014, the company expects earnings per share (EPS) between $4.56 and $4.60. This will represent a 9–10% year-over-year increase for the full year.
Genuine Parts frequently undertakes acquisitions to expand its business. In the first nine months of 2014, the company made seven acquisitions, including one in each of the four business segments. The company expects these to enhance its total annual revenue by $390 million. In addition, the company plans to undertake further acquisitions across its businesses. These will enhance its prospects for future growth.
Currently, Genuine Parts carries a Zacks Rank #2 (Buy).
Better-ranked automobile stocks worth considering include Douglas Dynamics, Inc. (PLOW), Motorcar Parts of America, Inc. (MPAA) and Meritor, Inc. (MTOR). All these stocks carry a Zacks Rank #1 (Strong Buy).
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