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Genuine Parts (GPC) to Post Q4 Earnings: What's in Store?

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Genuine Parts Company (GPC - Free Report) is set to report fourth-quarter 2018 results on Feb 19, before the opening bell.

In the last reported quarter, the company delivered an earnings miss of 0.67%. Over the trailing four quarters, it surpassed estimates twice while missing in the other two, the average surprise being negative 0.41%.

Shares of Genuine Parts have outperformed the industry it belongs to in the past three months. The stock gained 4.3% compared with 1.1% increase 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 the global presence and scale. In October, the company’s wholly-owned automotive distribution company, Alliance Automotive Group (“AAG”), completed the acquisition of two automotive businesses in the U.K. This is likely to have positive influence on the soon-to-be-released quarter. For 2018, Genuine Parts raised sales growth rate expectation to 14-15% from the previous 13-14%.

However, increasing debt, majorly due to acquisitions, is a concern for the company. 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 in Selling, General and Administrative (SG&A) expenses that are hampering the gross margin.

Earnings Whispers

Our proven model does not conclusively predict 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 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 -0.75% as the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $1.32 and $1.33, respectively. 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 negative 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:

Garrett Motion Inc. (GTX - Free Report) has an Earnings ESP of +12.96% and it is a #1 Ranked player. Its fourth-quarter 2018 results are slated to release on Feb 20.

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

Allison Transmission Holdings, Inc. (ALSN - Free Report) has an Earnings ESP of +5.94% and it currently carries a Zacks Rank #2. Its fourth-quarter 2018 results are scheduled to release on Feb 26.

Westport Fuel Systems Inc. (WPRT - Free Report) has an Earnings ESP of +50.00% and it currently carries a Zacks Rank #3.

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