Back to top

Image: Bigstock

Genuine Parts (GPC) to Post Q3 Earnings: What's in Store?

Read MoreHide Full Article

Genuine Parts Company (GPC - Free Report) is set to report third-quarter 2018 results on Oct 18, before the opening bell.

In the last reported quarter, the company delivered an earnings beat of 1.9%. Over the trailing four quarters, it topped estimates twice while missing in other two, with an average surprise of negative 2.6%.

Shares of Genuine Parts have outperformed the industry it belongs to in the past three months. The stock has gained 1.7% against 3.5% decline recorded by the industry.

Let’s see, how things have shaped up for the upcoming announcement.

Genuine Parts Company Price and EPS Surprise

 

Genuine Parts Company Price and EPS Surprise | Genuine Parts Company Quote

 

Factors Influencing This Quarter

Genuine Parts regularly undertakes acquisitions to expand global presence and scale. In mid-September, it announced that it is acquiring assets for its Industrial Group, Motion Industries, and U.S. Automotive Parts Group. Motion Industries signed an agreement to acquire Hydraulic Supply Company (HSC). In addition, the company has reached an agreement to acquire Hastings Auto Parts, Inc. Acquisition of Hydraulic Supply Company is likely to enhance the company’s industrial offerings and the buyout of Hastings is likely to expand its automotive footprint in the United States.

For 2018, Genuine Parts raised its guidance. This rise in estimates is due to an improving sales environment in the United States and increasing sales from retail customers, combined with the company’s continuing initiatives to offer value-added services for existing and new commercial customers. All these factors should have some positive impact on the soon-to-be-released earnings results.

However, increasing debt, majorly due to acquisitions, is a concern for the company. As of Jun 30, 2018, Genuine Parts’ long-term debt rose to $2.49 billion from $550 million in the prior year. High debt means that huge share of the company’s earnings is to be given to debt holders as an interest, thereby, lowering contributions for shareholders.

Further, rising cost of labor and delivery, as well as ongoing planned IT spending, are resulting in continuous rise of the company’s Selling, General and Administrative (SG&A) expenses that are hampering the gross margin.

Earnings Whispers

Our proven model does not conclusively show that Genuine Parts is likely to beat on earnings this quarter. This is because, a stock needs to have a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Genuine Parts has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.49. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Genuine Parts currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, this, combined with its Earnings ESP, makes a surprise prediction difficult. Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few auto stocks worth considering, comprising the right combination of elements to deliver an earnings beat this time around:

Cummins Inc. (CMI - Free Report) has an Earnings ESP of +1.73% and a Zacks Rank of 3. The company will report third-quarter 2018 financial figures on Oct 30.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory Holding Corp. (FOXF - Free Report) has an Earnings ESP of +2.77% and a Zacks Rank #3. The company’s third-quarter 2018 financial results are expected to be released on Nov 7.

Tesla, Inc. (TSLA - Free Report) has an Earnings ESP of +5.88% and is a Zacks #3 Ranked player. The company’s third-quarter 2018 financial numbers are expected to be announced on Nov 7.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>
 

Published in