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On June 7, we maintained our Outperform recommendation on Standard Motor Product Inc. (SMP - Analyst Report) based on its strong brand recognition, less cyclical end-market, efficient debt management measures, and impressive 2013-first quarter performance.

Why the Reiteration?

On May 3, 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 by 10 cents. Profits went up 79.6% to $9.7 million from $5.4 million in the year-ago quarter.

Total revenue increased 9% to $230.7 million, missing 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.

Following the release of the first quarter results, the Zacks Consensus Estimate for 2013 increased 5.9% to $2.33 per share. Moreover, the Zacks Consensus Estimate for 2014 increased 5.8% to $2.55 per share. With the Zacks Consensus Estimates for both 2012 and 2013 going up, the company retains a Zacks Rank #1 (Strong Buy).

Standard Motor benefits from its strong brand recognition. With a focus on the aftermarket, the company is less exposed to the cyclical automotive industry. The company will benefit from rising demand for repair products on the back of improved used vehicles market, increase in the number of automobiles on the road and rise in the average age of vehicles in the U.S.

However, the company faces challenges from concentrated customer base. The company’s top five customers include Advance Auto Parts Inc. (AAP - Analyst Report) and O’Reilly Automotive Inc. (ORLY - Analyst Report). These companies account for over 10% of its revenues.

Other Stocks to Consider
 
Apart from Standard Motor, other stocks that are performing well in the broader industry include Tower International, Inc. (TOWR - Snapshot Report). It retains a Zacks Rank #1 (Strong Buy).
 

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