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Genuine Parts Company (GPC - Analyst Report) is set to release its third quarter 2012 results before the market opens on October 18. The automotive replacement parts distributor posted a profit of $1.08 per share in the second quarter of 2012, in line with the Zacks Consensus Estimate. For the upcoming quarter, the Zacks Consensus Estimate for the company is $1.12 per share, reflecting an annualized estimated growth of 15.5%.

With respect to earnings surprise, the company has outperformed the Zacks Consensus Estimate in three of the trailing four quarters and met the same in the other. It has delivered an average earnings surprise of 4.6%, implying that it has beaten the Zacks Consensus Estimate by the same magnitude.

The Zacks Consensus Estimates for full-year 2012 is $4.06, implying an estimated year-over-year growth of 13.4%. The upside potential of the third quarter and full year estimates, essentially a proxy for future earnings surprises, would be about -0.89% and -0.25%, respectively.

Second Quarter Review

Genuine Parts reported an 11.1% rise in profits to $168.6 million in the quarter from $151.8 million in the year-ago quarter. Earnings per share increased 12.5% to $1.08 from 96 cents in the comparable quarter of 2011 and were in line with the Zacks Consensus Estimate.

Revenues in the quarter grew 4.8% to $3.3 billion, slightly lower than the Zacks Consensus Estimate of $3.4 billion. Operating profit also increased 4.5% to $705.0 million from $674.6 million a year ago, despite a 4% rise in selling, general and administrative expenses to $680.2 million during the quarter.

Genuine Parts has undertaken various initiatives to boost sales and earnings, such as product line expansion, penetration into new markets and cost-saving activities. The company relies on a diverse product portfolio for top-line and bottom-line growth.

Estimate Revisions Trend

Estimates for the third quarter have remained almost stable over the past 60 days.

Agreement of Estimate Revisions

Over the last 30 days, none of the six analysts covering the stock have revised the estimates upward while one analyst moved it downward. Over the last 7 days, none of the analysts revised the estimates for the quarter, implying the lack of near-term catalysts for the stock. Estimates for 2012 depict the same trend..

Magnitude of Estimate Revisions

Following the second quarter earnings release, estimates for the third quarter and full year have decreased by a penny to $1.12 and $4.06, respectively.

Our Take

Based in Atlanta, Georgia Genuine Parts distributes automotive and industrial replacement parts, office products and electrical/electronic materials in the U.S., Canada and Mexico. Its major competitors include Advance Auto Parts (AAP - Analyst Report) and AutoZone Inc. (AZO - Analyst Report).

Genuine Parts is likely to see higher sales and earnings due to its product line expansion, penetration into new markets and cost-saving activities. The company relies on a diverse product portfolio for top-line and bottom-line growth. In addition, rising demand in the Automotive Parts segment due to increase in average age of vehicles on the road to almost 11 years will enhance the company’s profitability.

Currently, Genuine Parts retains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating and we have a long-term (more than 6 months) Neutral recommendation on the stock.

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