Auto and Industrial Parts Distributor Reports Results

Genuine Parts (GPC) reported first-quarter results yesterday, with earnings per share (EPS) of $0.92 vs. $1.28 a year ago. The company indicated that COVID-19 had reduced EPS by $0.21, with another $0.10 reduction due to a valuation adjustment in employee retirement accounts as a result of the sharp decline in stock prices. Sales in the quarter declined by 2.6% on an organic basis.

As expected, the second quarter is off to a difficult start, with sales down 25% in April, driven by a 30% decline in the company’s  normally rock-steady automotive group sales. The demand for replacement parts has been weak as economies around the globe have been locked down due to COVID-19.

Yesterday, the stock declined by 3.2% on the news during what was a very difficult day for value stocks. While 2020 will not be a good year for the company, GPC should remain profitable. On yesterday’s conference call, CEO Paul Donahue noted that sales are surging in recently reopened economies like Germany.

The company will be well positioned to return EPS to at least $5.00 a share in 2021, compared to last year’s $5.69 as the global economy reopens and recovers. At less than 15X forward earnings with a secure 4.2% dividend yield in a very low interest rate environment, the stock is a solid value. My new buy under price for GPC is $80. My target is $90.