Share price of Standard Motor Products Inc. SMP gained 6.8% to $35.75 on Jul 30, after the company revealed expectations of improvement in results in second-half 2015 and announced a new share repurchase program, even as it reported weak earnings for the second quarter. Standard Motor recorded a 22.4% decline in adjusted earnings per share to 59 cents in the second quarter of 2015 from 76 cents earned in the prior-year quarter. Also, earnings missed the Zacks Consensus Estimate of 83 cents. Earnings from continuing operations fell 23.2% to $13.6 million from $17.7 million in the year-ago quarter.
Including litigation charges and other non-operational gains and losses, earnings amounted to $13.8 million or 59 cents per share, compared with $11.2 million or 48 cents in the prior-year quarter.
Total revenue dropped 1.1% to $269.4 million from $272.5 million a year ago, missing the Zacks Consensus Estimate of $279 million.
Gross profit decreased 6% to $72.8 million (27.0% of sales) from $77.4 million (28.4% of sales) in the second quarter of 2014. Operating income increased 21% to $21.31 million from $17.6 million in the year-ago quarter.
Segment Results
Revenues at the Engine Management segment went down 3.9% to $177 million in the reported quarter from $184.2 million a year ago. Operating profit was $21.8 million (12.3% of sales), compared with $27.6 million (15.0% of sales) in the prior-year quarter.
Revenues at the Temperature Control segment increased 4% to $89.1 million. The segment recorded an operating income of $3.2 million (3.6% of sales), down from $5.04 million (5.9% of sales) in the second quarter of 2014.
Revenues at the All Other segment improved to $3.31 million from $2.7 million a year ago. The segment recorded an operating loss of $4.0 million, marginally narrower than $4.1 million in the second quarter of 2014.
Financial Position
Standard Motor had cash balance of $12.7 million as of Jun 30, 2015, compared with $13.7 million as of Dec 31, 2014. Long-term debt of the company stood at $138,000 as of Jun 30, 2015, versus $258,000 as of Dec 31, 2014.
In the first half of 2015, Standard Motor had cash flow of $26.2 million from operating activities versus $17.6 million in the year-ago period. Capital expenditures rose to $10.2 million from $6.4 million a year ago.
Dividend Update
Standard Motor’s board approved a quarterly dividend of 15 cents per share. The dividend will be paid on Sep 1, to stockholders on record as of Aug 14, 2015.
Share Repurchase Program
Standard Motor increased its share repurchase authorization by $10 million, taking it to $20 million. Including the $3 million left from the previous authorization, the company now has $13 million available for share repurchases.
Outlook
Management expects better performance in the second half of 2015 compared with the first half, backed by strong market position, improving results from acquired companies, favorable industry conditions, rising sales and elimination of major one-time costs. The company expects to witness a low single-digit increase in net sales in the Engine Management segment going forward. Sales are also anticipated to rise at the Temperature Control segment this year, as a warm summer has been driving sales since June.
Zacks Rank
Standard Motor, based in Long Island City, NY, is one of the leading manufacturers, distributors and marketers of automotive replacement parts in the U.S. The company currently carries a Zacks Rank #4 (Sell).
Better-ranked automobile stocks include Tesla Motors, Inc. TSLA, PACCAR Inc. PCAR and Pep Boys – Manny, Moe & Jack PBY. Pep Boys currently sports a Zacks Rank #1 (Strong Buy), while both PACCAR and Tesla carry a Zacks Rank #2 (Buy).
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