Why Is Genuine Parts (GPC) Down 35.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Genuine Parts (GPC). Shares have lost about 35.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Genuine Parts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Genuine Parts Q4 Earnings & Sales Top Estimates

Genuine Parts reported adjusted earnings of $1.35 per share in fourth-quarter 2019, beating the Zacks Consensus Estimate of $1.31. The Automotive segment’s better-than-expected results drove this outperformance. The segment’s net sales came in at $2,799.8 million in the quarter, surpassing the Zacks Consensus Estimate of $2,718 million. The bottom line came in line with the year-ago profit of $1.35 a share.

Genuine Parts reported net sales of $4,706 million, outpacing the Zacks Consensus Estimate of $4,688 million. The top line, however, increased 2.2% year over year. Net sales included 0.5% comparable growth, 6.7% from acquisitions, partly offset by a 4.2% decline due to the sale of EIS, Inc (EIS) and Grupo Auto Todo, and 0.8% negative impact from foreign-currency translation.

Segmental Results

The Automotive segment’s net sales came in at $2,799.8 million, up 8.7% year over year. The segment’s comparable sales registered 12.9% growth during the fourth quarter. The segment’s operating profit increased to $200.6 million in the reported quarter from the prior year’s $199.3 million.

The Industrial Parts segment’s net sales slid 5.9% from the year-ago quarter to $1,478.3 million. The segment’s comparable sales declined 5.9%. Resultantly, operating profit decreased to $126.9 million from the year-earlier quarter’s $130.8 million.

The Business Products segment’s net sales fell to $428 million from the $456.8 million recorded in the prior-year quarter. Operating profit of the segment fell to $14 million from the $25.8 million recorded in the prior-year period.

Financial Position

Genuine Parts had cash and cash equivalents of $276.9 million as of Dec 31, 2019, down from $333.5 million in the corresponding period of 2018. As of Dec 31, 2019, its long-term debt increased to $2,802 million from the $2,432.1 million witnessed in the year-ago period. The company’s debt-to-capital ratio was 48.1% as of Dec 31, 2019.

Dividend

On Feb 18, Genuine Parts announced a 4% increase in the regular quarterly cash dividend for 2020, marking the 64th consecutive year of increased dividends paid to shareholders. The board approved a cash dividend of 79 cents per share to be paid on Apr 1, to shareholders of record as of Mar 6, 2020.

2020 Outlook

For full-year 2020, the company expects total sales growth of 3-4%. The company currently expects adjusted earnings per share within $5.80-$5.90 in 2020. Capital expenditures are projected at $275-$325 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.81% due to these changes.

VGM Scores

Currently, Genuine Parts has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Genuine Parts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.