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On Apr 3, we maintained our Outperform recommendation on Standard Motor Product Inc. (SMP - Analyst Report), based on its strong brand recognition, less cyclical end-market and efficient debt management measures and positive impact from the recent acquisitions.

 Why Maintained?

On Mar 4, 2013, Standard Motor reported a profit of $6.5 million or 28 cents per share in the fourth quarter of 2012 compared with $3.9 million or 17 cents per share in the same quarter of 2011 (excluding non-operational gains and losses in both the quarters). With this, the company has surpassed the Zacks Consensus Estimate by 7 cents.

Consolidated net sales in the quarter rose 10.4% to $192.4 million in the quarter, surpassing the Zacks Consensus Estimate of $188.0 million.

Following the release of the fourth quarter results, the Zacks Consensus Estimate for 2013 increased 2.5% to $2.09 per share. The Zacks Consensus Estimate for 2014 also edged up 0.9% to $2.28 per share. With the Zacks Consensus Estimates for both 2013 and 2014 going up, the company retains a Zacks Rank #2 (Buy).

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

In addition, Standard Motor will benefit from the recent acquisitions. The company has acquired BLD, Forecast Trading and Compressor Works, which have positive impacts on sales and will continue to generate savings through optimization of product costs and operating expenses, mostly in 2013.

However, Standard Motors 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 more than 10% of the company’s revenues.

Other Stocks to Consider

Apart from Standard Motors, other stocks that warrant a look in the same industry include Gentherm Incorporated (THRM - Snapshot Report), which carries a Zacks Rank #1 (Strong Buy).

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