Genuine Parts Company (GPC): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
We are upgrading our recommendation on Genuine Parts to Neutral based on rising cash flows, benefit from acquisitions and efficient capital deployment. However, sluggish demand in the Industrial and Office Products segments, rising competition and uncertainty in the macro environment are some headwinds. Genuine Parts' earnings per share increased 4.3% year over year to $0.97 in the fourth quarter of 2013, beating the Zacks Consensus Estimate of $0.92. Revenues in the quarter grew 12.8% to $3.5 billion, in line with the Zacks Consensus Estimate. The year-over-year improvement in revenues can be attributed to benefits from acquisitions, partially offset by the negative impact of currency translations.

Overview:

Genuine Parts Company GPC, based in Atlanta, Ga., distributes automotive and industrial replacement parts, office products and electrical/electronic materials in the U.S., Canada and Mexico. It operates under four segments: Automotive Parts, Industrial Parts, Office Products and Electrical/Electronic Materials.

In 2013, Automotive Parts comprised 53% of total sales, while the Industrial Parts, Office Products and Electrical/Electronic Materials constituted 31%, 12% and 4% of total sales, respectively.

The Automotive Parts segment distributes products through its National Automotive Parts Association (NAPA) distribution centers located across the U.S. In 2013, the company operated 62 domestic NAPA automotive parts distribution centers in 41 states and approximately 1,100 domestic NAPA auto parts stores in 46 states.

The Industrial Parts segment, which operates through a wholly owned subsidiary, Motion Industries, distributed over 240,000 different items through its 511 branches, 15 distribution centers and 42 service centers in North America as of Dec 31, 2013. Motion's rapid-delivery model provides customized products and technical expertise to customers in a just-in-time manner, enabling clients to reduce production costs and free working capital.

The Office Products segment operates through its wholly owned subsidiary, S.P. Richards Company. The segment distributed more than 55,000 items to over 4,300 business product resellers and distributors in the U.S. and Canada using a network of 41 distribution centers as of Dec 31, 2013.

The Electrical/Electronic Materials segment operates through a wholly owned subsidiary, EIS Inc. The segment was formed after the acquisition of EIS, an Atlanta-based distributor of electronic and electrical apparatus, in 1998. With 47 branch locations in the U.S., Puerto Rico, the Dominican Republic, Mexico and Canada, the group distributes over 100,000 items to more than 20,000 electrical and electronic manufacturers in North America.

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