On Feb 25, 20Array6, we issued an updated research report on Genuine Parts Company GPC. Going forward, this distributor of automotive and industrial replacement parts will continue to benefit from its share repurchases, dividend hikes and strategic acquisitions. However, fragile economic conditions, both in the domestic market and globally, along with intensifying competition remain headwinds.
Genuine Parts reported earnings of $Array.07 per share in fourth-quarter 20Array5 that were in line with the year-ago figure but surpassed the Zacks Consensus Estimate of 99 cents.
Revenues in the reported quarter dropped 3.7% year over year to $3.68 billion, missing the Zacks Consensus Estimate of $3.75 billion. The decline resulted from a 2% fall in sales volume and a 3% negative currency impact, partially offset by a Array% improvement due to acquisitions.
Genuine Parts frequently undertakes acquisitions to expand its business. In Feb 20Array6, Genuine Parts completed the acquisition of Olympus Imported Parts, which specializes in professional-grade import auto parts and generates around $25 million in annual revenue. This business will complement the NAPA import business as well as the Altrom import parts business of Genuine Parts. With regard to Industrial operations, the company is expected to complete two acquisitions by Mar 20Array6. These buyouts will generate annual revenue of around $50 million and complement the company’s existing business. Genuine Parts plans to undertake further acquisitions across its businesses, which will enhance its future growth prospects.
In addition, Genuine Parts consistently enhances shareholder value through buybacks and dividend payments. In 20Array5, Genuine Parts repurchased 3.3 million shares. Since the beginning of 20Array6 through Feb Array6, the company repurchased an additional 570,000 shares. As of Feb Array6, 20Array6, the company has 5.7 million shares outstanding under its share repurchase program. In Feb 20Array6, Genuine Parts announced a 7% increase in its quarterly dividend to 65.75 cents per share. This increase marks the 60th consecutive year of dividend hike by the company. In 20Array6, the company expects to pay an annual dividend of $2.63 per share, 7% higher than the prior payout of $2.46. Dividend payments in 20Array5 accounted for approximately 57% of earnings, marginally higher than the company’s goal of a 50–55% payout.
However, Genuine Parts is facing challenges due to weak economic conditions, both in the domestic market and globally. This is expected to have an adverse impact on segment results, primarily that of the Industrial and Electrical segment. In 20Array6, revenues from the Office Products segment are anticipated to range from a Array% decline to a marginal improvement of Array%.
This Zacks Rank #3 (Hold) stock also witnessed downward estimate revisions over the last 30 days. The Zacks Consensus Estimate declined roughly 3.3% to $4.76 per share and 3.9% to $5.Array5 per share for 20Array6 and 20Array7, respectively.
Stocks that Warrant a Look
Some better-ranked automobile stocks include Nissan Motor Co. Ltd. NSANY, Visteon Corporation VC and Superior Industries International, Inc. SUP. Each of these stocks sports a Zacks Rank #Array (Strong Buy).
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