Genuine Parts (GPC) Q1 Earnings: What's In Store?

Genuine Parts (NYSE:GPC) will release its first-quarter fiscal 2017 results ahead of the bell on Apr 19.

Genuine Parts logged adjusted earnings of $1.02 per share for fourth-quarter fiscal 2016, down 4.7% from the year-ago quarter. However, earnings beat the Zacks Consensus Estimate of $1.01, posting a positive earnings surprise of 0.99%. Revenues rose roughly 3% year over year to $3.78 billion in the reported quarter and surpassed the Zacks Consensus Estimate of $3.77 billion.

Let’s see how things are shaping up for this announcement.

Genuine Parts Company Price and Consensus

Factors to Consider

Genuine Parts has undertaken various initiatives to boost sales and earnings, such as product line expansion, penetration into new markets and cost-saving activities. The company relies on a diverse product portfolio for top- and bottom-line growth.

Earnings per share in 2017 are expected in the band of $4.70–$4.80, up from the $4.59 recorded in 2016. Annual revenues of Genuine Parts are expected to increase in the range of 3% to 4%, while comparable sales growth is projected to increase 2% to 3%. Revenues from Automotive and Industrial are estimated to increase in the range of 3% to 4%, Office segment is expected to witness 2% to 3% improvement, and the Electrical segment is likely to grow 1% to 2%.

Genuine Parts is actively pursuing strategic initiatives to expand its business. Recently, the company acquired Empire Wire and Supply, which is expected to generate annual revenue of $65 million. Empire is expected to generate revenues of roughly $65 million annually.

However, high level of inventory is a challenge for the company. The high proportion of inventory in current assets can affect the short-term liquidity of the company in periods of low sales. Moreover, the company also saw lower generation of cash flow from operations in 2016 compared to 2015. Quarterly earnings estimates for Genuine Parts have been declining of late.

Genuine Parts’ shares dropped 9.3% in the last three months, underperforming the Zacks categorized Auto/Truck Replacement Parts industry’s decline of 7%.

Earnings Whispers

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

Zacks ESP: Earnings ESP for Genuine Parts is currently 0.00%. This is because the Most Accurate estimate as well as the Zacks Consensus Estimate is both pegged at $1.05. 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 #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.

Concurrently, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Surprise History

Genuine Parts Company surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed in two, with an average miss of 0.62%.

Stocks to Consider

Here are some companies in the Auto/Truck Replacement Parts industry you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Cummins Inc. (NYSE:CMI) has a earnings ESP of +1.69% and carries a Zacks Rank #2. The company’s first-quarter 2017 financial results will release on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CNH Industrial N.V. (NYSE:CNHI) has an Earnings ESP of +33.33% and carries a Zacks Rank #2. The company’s first-quarter 2017 financial results are expected to release on May 5.

General Motors Company (NYSE:GM) has an Earnings ESP of +9.72% and carries a Zacks Rank #3. The company’s first-quarter 2017 financial results will release on Apr 28.

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