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Genuine Parts Co  (NYSE:GPC) Operating Income: $1,064 Mil (TTM As of Jun. 2017)

Genuine Parts Co's Operating Income for the three months ended in Jun. 2017 was $297 Mil. ts operating income for the trailing twelve months (TTM) ended in Jun. 2017 was $1,064 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. Genuine Parts Co's Operating Income for the three months ended in Jun. 2017 was $297 Mil. Genuine Parts Co's Revenue for the three months ended in Jun. 2017 was $4,100 Mil. Therefore, Genuine Parts Co's Operating Margin % for the quarter that ended in Jun. 2017 was 7.25%.

Warning Sign:

Genuine Parts Co operating margin has been in 5-year decline. The average rate of decline per year is -1.2%.

Genuine Parts Co's 5-Year average Growth Rate for Operating Margin % was -1.20% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. Genuine Parts Co's annualized ROC % for the quarter that ended in Jun. 2017 was 18.35%. Genuine Parts Co's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jun. 2017 was 45.14%.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Genuine Parts Co Annual Data

Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 1,015.13 1,049.24 1,124.23 1,124.41 1,069.77

Genuine Parts Co Quarterly Data

Sep12 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 300.05 291.36 231.72 243.78 297.14

Calculation

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Genuine Parts Co's Operating Income for the fiscal year that ended in Dec. 2016 is calculated as

Operating Income(A: Dec. 2016 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=15339.713-10740.106-3370.833
-Research & Development-Depreciation, Depletion and Amortization-Others
-0-147.487-11.515
=1,070

Genuine Parts Co's Operating Income for the quarter that ended in is calculated as

Operating Income(Q: Jun. 2017 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=4100.178-2860.466-903.343
-Research & Development-Depreciation, Depletion and Amortization-Others (1)
-0-39.232-5.68434188608E-14
=297

Operating Income(Q: Jun. 2017 )
=EBITDA-Depreciation, Depletion and Amortization-Others (2)
=336.369-39.232-5.68434188608E-14
=297

Operating Income for the trailing twelve months (TTM) ended in Jun. 2017 was 291.357 (Sep. 2016 ) + 231.718 (Dec. 2016 ) + 243.775 (Mar. 2017 ) + 297.137 (Jun. 2017 ) = $1,064 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition.

Genuine Parts Co's annualized ROC % for the quarter that ended in Jun. 2017 is calculated as:

ROC %(Q: Jun. 2017 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Mar. 2017 ) + Invested Capital (Q: Jun. 2017 ))/2)
=1188.548 * ( 1 - 36.07% )/( (4066.056 + 4214.979)/2)
=759.8387364/4140.5175
=18.35 %

where

Invested Capital(Q: Mar. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=550 + 475 + 3218.973 - 177.917
=4066.056

Invested Capital(Q: Jun. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=550 + 580 + 3288.124 - 203.145
=4214.979

Note: The Operating Income data used here is four times the quarterly (Jun. 2017) operating income data.

2. Joel Greenblatt's definition of Return on Capital:

Genuine Parts Co's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jun. 2017 is calculated as:

ROC (Joel Greenblatt's)(Q: Jun. 2017 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Property, Plant and Equipment+Net Working Capital)
     Q: Mar. 2017  Q: Jun. 2017
=EBIT/( ( (Property, Plant and Equipment + Net Working Capital) + (Property, Plant and Equipment + Net Working Capital) )/2 )
=1188.548/( ( (737.206 + max(1911.312, 0)) + (740.776 + max(1877.104, 0)) )/2 )
=1188.548/( ( 2648.518 + 2617.88 )/2 )
=1188.548/2633.199
=45.14 %

where Working Capital is:

Working Capital(Q: Mar. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(2084.871 + 3287.042 + 644.232) - (3396.079 + 0 + 708.754)
=1911.312

Working Capital(Q: Jun. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(2169.97 + 3330.189 + 598.112) - (3430.378 + 0 + 790.789)
=1877.104

When net working capital is negative, 0 is used.

Note: The EBIT data used here is four times the quarterly (Jun. 2017) EBIT data.

3. Operating Income is also linked to Operating Margin:

Genuine Parts Co's Operating Margin % for the quarter that ended in Jun. 2017 is calculated as:

Operating Margin %=Operating Income (Q: Jun. 2017 )/Revenue (Q: Jun. 2017 )
=297.137/4100.178
=7.25 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

4. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the operating income growth rate using operating income per share data.


Be Aware

Compared with a company's EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company's revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)'s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia's Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus's Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


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