Back to top

Analyst Blog

Standard Motor Product Inc. (SMP - Analyst Report) announced the amendment of its $200 million revolving credit facility with GE Capital Corporate Finance maturing on Mar 2015. GE Capital acted as the agent for a syndicate of lenders.

Under the amendment, the credit line has been extended by $50 million to $250 million and interest rates have been reduced by 25 basis points. The maturity date has been extended to Mar 2018. The credit facility will be secured by the company's accounts receivable, inventory and fixed assets.

This amendment will improve the pricing terms and provide Standard Motor with greater flexibility for implementation of its strategic plans. If the company prospers through this initiative, the shareholders will stand to benefit in the long run.

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. Further, it enjoys strong brand recognition globally.

Standard Motor reported a staggering 82.6% rise in adjusted earnings per share to 42 cents in the first quarter of 2013 from 23 cents in the year-ago quarter. Earnings per share also surpassed the Zacks Consensus Estimate of 32 cents.

Total revenue increased 9% to $230.7 million but missed the Zacks Consensus Estimate of $234.0 million. The year-over-year growth in revenues was attributable to the positive impact from the company’s acquisitions and strong performance of the company’s Temperature Control segment.

We believe that Standard Motor will benefit from its strong brand recognition, less cyclical end-market and efficient debt management measures and positive impact from the recent acquisitions. However, we are concerned about the company’s high dependence on its three major customers, namely,  Advance Auto Parts Inc. (AAP - Analyst Report), AutoZone Inc. (AZO - Analyst Report) and O’Reilly Automotive Inc. (ORLY - Analyst Report) for its business. Currently, Standard Motor carries a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.