Genuine Parts (GPC) Q1 Earnings Top, Announces Acquisition

Genuine Parts Company (NYSE:GPC) reported earnings of $1.08 per share in first-quarter 2017, higher than $1.05 recorded in the year-ago quarter. Also, earnings per share surpassed the Zacks Consensus Estimate of $1.05.

The company recorded net income of $160.2 million in the first quarter of 2017, up from $158 million in the prior-year quarter.

Revenues in the reported quarter rose 5% year over year to $3.91 billion and surpassed the Zacks Consensus Estimate of $3.87 billion. The rise was due to growth in the company’s international automotive, industrial, electrical and office operations businesses, partly offset by headwinds in the U.S. automotive business.

Operating profit increased to $286.9 million from $284.6 million in the first quarter of 2017, and selling, general and administrative expenses rose to $873.8 million from $823.2 million a year ago.

Genuine Parts Company Price, Consensus and EPS Surprise

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

Segment Results

Revenues at the Automotive Parts segment improved 3% to $2 billion from the year-ago level of $1.93 billion. The segment’s operating profit decreased to $151.8 million in the reported quarter from $153.7 million a year ago.

Revenues at the Motion Industries or Industrial segment increased 7% to $1.23 billion. Operating profit at the segment was $90.4 million, up from $81.8 million in the year-ago quarter.

The Electrical or EIS segment’s revenues rose 9% year over year to $184.4 million. Operating profit decreased to $13.6 million from $14.8 million in the year-ago quarter.

The S. P. Richards or Office Products segment’s revenues improved 5% to $519 million. Operating profit at the segment declined to $31.1 million from $34.2 million a year ago.

Financial Position

Genuine Parts had cash and cash equivalents of $177.9 million as of Mar 31, 2017, down from $205.1 million as of Mar 31, 2016. However, long-term debt increased to $550 million as of Mar 31, 2017, from $250 million as of Mar 31, 2016.

In first-quarter 2017, Genuine Parts’ net cash flow from operations decreased to $101.8 million from $135 million in the prior-year period. Capital expenditures increased to $24.8 million from $11.7 million in the year-ago period.

Guidance

For 2017, Genuine Parts continues to expect annual revenues to increase 3% to 4%. Earnings per share in 2017 are expected to be in the range of $4.75–$4.85, up from the prior expectation of $4.70–$4.80.

Acquisition

Genuine Parts has entered into a definitive agreement to acquire Merle's Automotive Supply, an automotive parts distributor with 14 locations. The acquisition is expected to generate annual revenues of $45 million. The deal is expected to conclude on May 1, 2017.

Price Performance

Genuine Parts has underperformed the Zacks categorized Auto/Truck Replacement Parts industry over the last three months. During this period, the company’s share price decreased 9.1%, while the industry lost 7.4%.

Zacks Rank & Key Picks

Genuine Parts Motors currently carries a Zacks Rank #4 (Sell).

Some better-ranked companies in the auto space include BorgWarner Inc. (NYSE:BWA) , American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) and GKN (LON:GKN) plc (OTC:GKNLY) . All stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BorgWarner has an expected long-term growth rate of 8.6%.

American Axle has an expected growth rate of around 8.1% over the long term.

GKN has an expected long-term growth rate of 6.6%.

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