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Genuine Parts (GPC) Q4 Earnings: A Surprise in the Cards?

Zacks Equity Research
Updated

Genuine Parts Company GPC is set to report fourth-quarter fiscal 2016 results on Feb 21. In the last quarter, the company posted a positive earnings surprise of 1.15%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Genuine Parts has undertaken various initiatives to boost sales and earnings, such as product line expansion, penetration into new markets and cost-saving activities. The company relies on a diverse product portfolio for top- and bottom-line growth. Moreover, its recent acquisitions should drive sales in the quarter to be reported.

During its third quarter conference call, Genuine Parts had trimmed its annual guidance. It slashed the annual revenue guidance to flat to up 1% over 2015, from the previous expectation of 1–2%. The earnings per share guidance was also lowered to the range of $4.55–$4.60, from the previous $4.70–$4.75. This outlook is also lower than earnings of $4.63 recorded in 2015. An unfavorable outlook for the year will lead to poor results in the to-be-reported quarter as well.

Genuine Parts is also facing challenges in the non-automotive business. Moreover, competitive pricing by the company can mar its revenues and earnings.

Earnings Whispers

Our proven model does not conclusively show that Genuine Parts is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Genuine Parts is 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.01. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Genuine Parts carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
 

Genuine Parts Company Price and EPS Surprise
 

Genuine Parts Company Price and EPS Surprise | Genuine Parts Company Quote

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Surprise History

The company posted better-than-expected results in two of the four trailing quarters, while lagging in the other two. Average earnings surprise was a positive 1.15%.

Price Performance

Genuine Parts has underperformed the Zacks categorized Auto/Truck Replacement Parts industry over the last three months. During this period, the company’s share price rose 4.8% while the industry saw a 15% increase. Share price was adversely affected by challenges in the non-automotive business, poor performance in the first nine months of 2016 and a cut in annual guidance for 2016.


Stocks to Consider

Here are a few companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Spartan Motors, Inc. SPAR has an Earnings ESP of +50.0% and a Zacks Rank #1. The company’s fourth-quarter and full-year 2016 financial results are expected to release on Feb 23. You can see the complete list of today’s Zacks #1 Rank stocks here.

W&T Offshore, Inc. WTI is expected to release fourth-quarter earnings results on Mar 14. The company has an Earnings ESP of +73.91% and a Zacks Rank #1.

Visteon Corporation VC has an Earnings ESP of +5.93% and a Zacks Rank #3. The company’s fourth-quarter and full-year 2016 financial results are likely to release on Feb 23.

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Visteon Corporation (VC): Free Stock Analysis Report
 
Spartan Motors, Inc. (SPAR): Free Stock Analysis Report
 
Genuine Parts Company (GPC): Free Stock Analysis Report
 
W&T Offshore, Inc. (WTI): Free Stock Analysis Report
 
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Zacks Investment Research