Slowdown Hampers Standard

Standard Motor Products, Inc. (SMP - Analyst Report) has achieved significant cost savings due to the successful integration of the Dana Engine Management business. The company also has strong brand recognition and a less cyclical end-market within the auto and auto parts industry.

Moreover, SMP expects to benefit from the shifting of its production facilities to Mexico on account of low labor costs. Further, the company's temperature control segment is facing strong competition with the Chinese imports.

Standard Motor announced results for its first quarter ended March 31, 2008. In the reported quarter, earnings from continuing operations were $0.68 per diluted share, compared to $0.16 per diluted share in the prior-year quarter. Excluding restructuring expenses, a gain from the sale and leaseback of its corporate facilities in Long Island City, New York and the associated defeasance costs on the building mortgage, earnings from continuing operations for the first quarter was $0.17 per diluted share, compared to $0.18 per share for the same period of the previous year.

Currently, shares of Standard Motor Products are trading at 8.6x our 2008 EPS estimate of $0.83. The company's savings from acquisitions, competitive advantage and its brand recognition could enhance stock performance in the long-term. However, slow growth, weak pricing in the company's key businesses, and higher oil and metal prices are serious matters of concern. Thus, we rate the stock a Hold and lower our six-month target price to $7 based on higher oil and metal prices. This is 8.4x our 2008 EPS estimate.

Read the full analyst report on SMP.