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Reasons to Hold On to Genuine Parts (GPC) Stock For Now
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Genuine Parts’ (GPC - Free Report) shares have gained 8.1% in the past year, against the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
Based out of Atlanta, GA, Genuine Parts distributes automotive and industrial replacement parts and materials. Genuine Parts had a presence in 15 countries across 10,000 locations and employed approximately 52,000 people worldwide, as of 2021 end. It has two operating segments, namely, Automotive Parts and Industrial Parts. The automotive segment’s distribution centers provide replacement parts, accessories and service items throughout North America, Europe and Australasia. The Industrial Parts Group operates as Motion Industries, Inc. (Motion) and provides industrial replacement parts and related supplies, such as bearings, mechanical and electrical power transmission products, industrial automation, hose, hydraulic and pneumatic components, industrial and safety supplies, and material handling products.
Genuine Parts is thriving well on strategic acquisitions. The Kaman Distribution Group buyout, completed in January 2022, promises to cement its position in the North American industrial platform, provide significant synergies and bolster growth prospects. The company is also gaining from the twin acquisitions of Axis New England and Axis New York. With the Inneco buyout, Genuine Parts expanded its industrial outreach into Australasia. Other strategic bolt-on acquisitions, including Winparts, Rare Spares, PartsPoint and Alliance Automotive Group, are feeding the top-line growth of the Automotive segment.
Genuine Parts is focused on being an investor-friendly firm. Its dividend aristocracy instills investors’ confidence. The company has paid a cash dividend every year since going public in 1948. Genuine Parts approved a $3.58-per-share annual dividend for 2022, marking its 66th consecutive annual dividend increase. It also follows an active share buyback program. In 2021, the company repurchased 2.6 million shares for $334 million. Genuine Parts' return on equity (ROE) of 30% is higher than the industry's 23%, demonstrating its culture of rewarding shareholders.
The company reported net sales of $4,803 million in fourth-quarter 2021, climbing around 13% yearly. The growth mainly resulted from 11.3% increase in comparable sales and a 1.9% benefit from acquisitions. Genuine Parts also recorded robust revenue growth across its two segments, led by comparable sales growth, acquisition benefits and favorable foreign currency translations. Operating profits also rose year over year. The impressive performance led the company to keep an optimistic guidance for 2022, where it projects revenues from the Automotive segment to increase 4-6% year over year and those from the Industrial segment are expected to rise 20-22% year on year. An upbeat outlook makes Genuine Parts poised for momentum ahead.
Amid such positive prospects, here are some challenges the company is currently facing:
Genuine Parts is bearing the brunt of increasing selling, general and administrative (SG&A) costs since the past several quarters and expects to continue doing the same, which is hurting operating profits. The company is working on technology advancement as it aims to offer more upgraded solutions. These new features and component designs require high research and development (R&D) costs and capex, which in turn limit margins.
Unfavorable foreign currency translations are anticipated to dent revenues to some extent. Genuine Parts takes into account 2% headwind from adverse foreign currency translation on 2022 sales. Moreover, the global chip crunch, currently wreaking havoc on the auto industry, adds to the firm’s woes. Supply chain disruptions, which are resulting in high freight, labor and commodity costs, are somewhat throttling the company.
Moreover, elevated leverage, as represented by a total debt-to-capital ratio of 0.41, higher than the sector’s 0.33, reduces its financial flexibility to tap opportunities.
Three Key Picks
Some better-ranked players in the auto space include Harley-Davidson (HOG - Free Report) , LCI Industries (LCII - Free Report) and CarGurus (CARG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), currently.
Harley-Davidson has an expected earnings growth rate of 1.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 21.7% upward in the past 60 days.
Harley-Davison’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. HOG pulled off a trailing four-quarter earnings surprise of 77.59%, on average. The stock has rallied 5.2% over the past year.
LCI Industries has an expected earnings growth rate of 27.8% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 16% upward in the past 60 days.
LCI Industries’ earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in the other one. LCII pulled off a trailing four-quarter earnings surprise of 12.86%, on average. The stock has declined 19.4% over the past year.
CarGurus has an expected earnings growth rate of 5.1% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 20.3% upward in the past 60 days.
CarGurus’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. CARG pulled off a trailing four-quarter earnings surprise of 45.34%, on average. The stock has risen 65.5% over the past year.
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Reasons to Hold On to Genuine Parts (GPC) Stock For Now
Genuine Parts’ (GPC - Free Report) shares have gained 8.1% in the past year, against the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
Based out of Atlanta, GA, Genuine Parts distributes automotive and industrial replacement parts and materials. Genuine Parts had a presence in 15 countries across 10,000 locations and employed approximately 52,000 people worldwide, as of 2021 end. It has two operating segments, namely, Automotive Parts and Industrial Parts. The automotive segment’s distribution centers provide replacement parts, accessories and service items throughout North America, Europe and Australasia. The Industrial Parts Group operates as Motion Industries, Inc. (Motion) and provides industrial replacement parts and related supplies, such as bearings, mechanical and electrical power transmission products, industrial automation, hose, hydraulic and pneumatic components, industrial and safety supplies, and material handling products.
However, this Zacks Rank #3 (Hold) firm is currently bogged down by certain headwinds that are keeping investors at the bay. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s delve deeper:
Genuine Parts is thriving well on strategic acquisitions. The Kaman Distribution Group buyout, completed in January 2022, promises to cement its position in the North American industrial platform, provide significant synergies and bolster growth prospects. The company is also gaining from the twin acquisitions of Axis New England and Axis New York. With the Inneco buyout, Genuine Parts expanded its industrial outreach into Australasia. Other strategic bolt-on acquisitions, including Winparts, Rare Spares, PartsPoint and Alliance Automotive Group, are feeding the top-line growth of the Automotive segment.
Genuine Parts is focused on being an investor-friendly firm. Its dividend aristocracy instills investors’ confidence. The company has paid a cash dividend every year since going public in 1948. Genuine Parts approved a $3.58-per-share annual dividend for 2022, marking its 66th consecutive annual dividend increase. It also follows an active share buyback program. In 2021, the company repurchased 2.6 million shares for $334 million. Genuine Parts' return on equity (ROE) of 30% is higher than the industry's 23%, demonstrating its culture of rewarding shareholders.
The company reported net sales of $4,803 million in fourth-quarter 2021, climbing around 13% yearly. The growth mainly resulted from 11.3% increase in comparable sales and a 1.9% benefit from acquisitions. Genuine Parts also recorded robust revenue growth across its two segments, led by comparable sales growth, acquisition benefits and favorable foreign currency translations. Operating profits also rose year over year. The impressive performance led the company to keep an optimistic guidance for 2022, where it projects revenues from the Automotive segment to increase 4-6% year over year and those from the Industrial segment are expected to rise 20-22% year on year. An upbeat outlook makes Genuine Parts poised for momentum ahead.
Amid such positive prospects, here are some challenges the company is currently facing:
Genuine Parts is bearing the brunt of increasing selling, general and administrative (SG&A) costs since the past several quarters and expects to continue doing the same, which is hurting operating profits. The company is working on technology advancement as it aims to offer more upgraded solutions. These new features and component designs require high research and development (R&D) costs and capex, which in turn limit margins.
Unfavorable foreign currency translations are anticipated to dent revenues to some extent. Genuine Parts takes into account 2% headwind from adverse foreign currency translation on 2022 sales. Moreover, the global chip crunch, currently wreaking havoc on the auto industry, adds to the firm’s woes. Supply chain disruptions, which are resulting in high freight, labor and commodity costs, are somewhat throttling the company.
Moreover, elevated leverage, as represented by a total debt-to-capital ratio of 0.41, higher than the sector’s 0.33, reduces its financial flexibility to tap opportunities.
Three Key Picks
Some better-ranked players in the auto space include Harley-Davidson (HOG - Free Report) , LCI Industries (LCII - Free Report) and CarGurus (CARG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), currently.
Harley-Davidson has an expected earnings growth rate of 1.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 21.7% upward in the past 60 days.
Harley-Davison’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. HOG pulled off a trailing four-quarter earnings surprise of 77.59%, on average. The stock has rallied 5.2% over the past year.
LCI Industries has an expected earnings growth rate of 27.8% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 16% upward in the past 60 days.
LCI Industries’ earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in the other one. LCII pulled off a trailing four-quarter earnings surprise of 12.86%, on average. The stock has declined 19.4% over the past year.
CarGurus has an expected earnings growth rate of 5.1% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 20.3% upward in the past 60 days.
CarGurus’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. CARG pulled off a trailing four-quarter earnings surprise of 45.34%, on average. The stock has risen 65.5% over the past year.