Genuine Parts Company (GPC, Financial) reported solid results for the third quarter that came above the street expectations. This was driven by recent acquisitions made by the company that led its sales growth across all business segments. As a result of its robust performance the stock soared and is currently at its 52-week high. Now let’s have a detailed analysis of this stock; but before that we will look at its numbers during the quarter.
Analysis of the results
Its revenue for the quarter rose 8.2% to $3.99 billion from a year ago period and was marginally better than the analyst’s expectations of $3.96 billion. Earnings came at $1.24 a share compared to $1.12 last year and edged the consensus of $1.23 $ per share. The company reported year over year sales growth in all its segments. The highest sales growth of 35% was seen in its electrical units.
Focusing on the segments
The results are indeed impressive, which cheered the street and pushed the stock to new highs. And such positive sentiments from investors do make sense as GPC not only reported a year over year growth but grew on a sequential basis as well. The company operates in various categories such as automotive, industrial, electrical units and office products among others. Of these, industrial product is the second largest segment, which contributes around 31% to the total revenue.
In spite of various challenges faced by the company on account of rising competition and uncertainty in the macroeconomic environment, it is anticipating a positive growth in the days ahead. GPC has taken various initiatives to boost its sales, which includes product line expansion, new acquisitions and various others.
On a category basis, the company performed well on all fronts. ELS, which is its electrical, electronic and wire and cable segment reported strongest quarter of the year with 35% increase in sales. Albeit, a major part of its revenue came from acquisitions but even if we exclude the acquisitions, on a standalone basis the products had a decent performance. And with all the recent acquisitions the company strengthened its position in this competitive environment.
S.P.Richards, its office product brand had a sales growth of 15%, which is quite impressive compared to previous quarters. This also had a major contribution from its acquisitions along with a currency impact bolstering its sales further. In addition its new Office Depot agreement was a significant contributor as well. A similar up trend was seen across GPC’s four major product categories namely Technology products, core office supplies and furniture.
On the automotive front, GPC reported robust year over year growth across various geographical locations including the U.S., Canada, Mexico, Australia and New Zealand. Apart from this it also saw strong growth in the Southern, Atlantic and Mountain regions of the country. The key drivers of growth in its commercial business are the NAPA AutoCare centers and its strong alliance with its major account customers. The management said “These two big wholesale initiatives continue to exceed expectations.”
Conclusion
It has a trailing P/E of 20.72, which is better than the industry P/E of 22.04 and its forward P/E looks even more impressive at 18.53, reflecting a significant improvement in its earnings. The company had a fine performance during the quarter and the management expects the same momentum to continue in the days ahead. Moreover, the stock soared to its all time highs, which again is a positive cue of strong fundamentals of the company. Therefore in the light of all the above factors Genuine Parts Company seems to be a good investment option.
