On Mar 12, 2015, we issued an updated research report on Standard Motor Products Inc. SMP. This Zacks Rank #2 (Buy) stock had reported a positive earnings surprise of 6.5% in the last quarter.
Standard Motor reported a 16.7% rise in adjusted earnings per share to 49 cents in the fourth quarter of 2014 from 42 cents in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate by 3 cents. However, total revenue decreased marginally to $218.1 million from $218.7 million a year ago, missing the Zacks Consensus Estimate of $220 million.
Standard Motor possesses a strong competitive advantage due to its brand recognition and sizeable customer base. Well-recognized brand names help in expanding the consumer base further. In addition, Standard Motor is not significantly exposed to the cyclical nature of the automotive industry since it is focused on the aftermarket, where it is a leading player.
Demand for repair products is expected to rise, due to growth in the used-vehicles market and an increase in the average age of automobiles in the U.S. In addition, the decrease in gas price is leading to an increase in the use of automobiles, thus increasing the number of miles traveled. This will have a favorable impact on the results of the company.
Standard Motor is also expanding its business through acquisitions. In the past three years, the company has made eight acquisitions.
Standard Motor has a strong financial position and promising long-term business prospects. In Feb 2015, Standard Motor announced a 15.4% increase in quarterly dividend to 15 cents per share. In addition, on Feb 25, 2015, the company’s board of directors authorized the repurchase of up to an additional $10 million of its shares under the stock repurchase program. These capital deployment measures are expected to boost shareholder value.
Key Picks from the Sector
Better-ranked auto stocks include Allison Transmission Holdings, Inc. ALSN, American Axle & Manufacturing Holdings Inc. AXL and Wabash National Corp. WNC. All these stocks sport a Zacks Rank #1 (Strong Buy).
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