Why Is Genuine Parts (GPC) Down 3.9% Since the Last Earnings Report?

More than a month has gone by since the last earnings report for Genuine Parts Company GPC. Shares have lost about 3.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 drivers.

Genuine Parts Q3 Earnings Lag Estimates, Revenues Beat

Genuine Parts reported earnings of $1.08 per share in the third quarter of 2017 compared with $1.24 recorded in the year-ago quarter. Adjusted earnings came in at $1.16 per share, which missed the Zacks Consensus Estimate of $1.28.

The company recorded net income of $158.4 million in the third quarter of 2017, down from $185.3 million in the prior-year quarter.

Genuine Parts reported revenues of $4.09 billion, up 3.9% year over year. The Zacks Consensus Estimate for revenues was $4.08 billion.

Operating profit declined to $310.3 million from $328 million in the third quarter of 2016. Selling, general and administrative expenses rose to $940.3 million from $869.6 million a year ago.

Segment Results

Revenues from the Automotive Parts segment improved 3.6% to $2.2 billion from the year-ago level of $2.1 billion. The segment’s operating profit however decreased to $178.2 million in the reported quarter from $197.9 million a year ago.

Revenues at the Motion Industries or Industrial segment increased 7.1% to $1.24 billion. Operating profit at the segment was $94.6 million, up from $85.6 million in the year-ago quarter.

The Electrical or EIS segment’s revenues rose 11.6% year over year to $199.2 million. Operating profit, however, decreased to $13.5 million from $14.3 million in the year-ago quarter.

The S. P. Richards or Office Products segment’s revenues declined 4.7% to $510 million. Operating profit at the segment declined to $24 million from $30.3 million recorded  in the prior-year quarter.

Financial Position

Genuine Parts had cash and cash equivalents of $210.1 million as of Sep 30, 2017, down from $225.2 million as of Sep 30, 2016. Long-term debt increased to $550 million as of Sep 30, 2017 from $300 million as of Sep 30, 2016.

In third-quarter 2017, capital expenditure increased to $43.1 million from $36.9 million, in the year-ago period.

Guidance

For 2017, Genuine Parts raised its revenue growth rate from the range of 3%–4% to 4%–4.5%. Adjusted earnings per share in 2017 are expected to be in the range of $4.55–$4.60.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

VGM Scores

At this time, the stock has a subpar Growth Score of D, though it is lagging a bit on the momentum 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

The stock is suitable solely for value based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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