On Wednesday, UBS analyst adjusted the price target for Genuine Parts (NYSE:GPC) to $125 from the previous $145 while maintaining a Neutral rating on the stock. The analyst cited the company's third-quarter results, which did not meet expectations, and a reduced outlook that suggests a challenging environment will continue into the fourth quarter.
Genuine Parts reported weaker-than-anticipated top-line results and rising costs in the third quarter. The company experienced a significant $140 million negative impact from slower sales in its European automotive and Industrial businesses, as well as a $40 million hit from hurricanes and CrowdStrike (NASDAQ:CRWD) disruptions in July.
These factors led to a $0.36 earnings per share (EPS) shortfall compared to the company's internal EPS projection, which was around $2.24 for the third quarter.
Lasser pointed out that the most significant deviation from their model was the unexpectedly high selling, general, and administrative (SG&A) expenses. These were driven by planned investments, cost inflation, and the impacts of acquisitions. The analyst expressed concerns that SG&A pressures would likely persist, necessitating an improvement in sales to counteract the negative leverage effect.
Looking forward, Genuine Parts has reset its fourth-quarter expectations to a more achievable level, acknowledging the anticipated pressures. However, UBS believes that the stock currently lacks a near-term catalyst that could drive its value higher. The firm suggests that the company must first reestablish a solid track record of execution before the market will elevate the stock to a new level.
In other recent news, Genuine Parts Company (NYSE:GPC) has reported mixed results for its third-quarter 2024 performance. Despite facing market headwinds, the company saw a 2.5% year-over-year increase in total sales, amounting to approximately $6 billion.
This growth was bolstered by strategic acquisitions in the U.S. automotive sector and an extra selling day. However, adjusted diluted earnings per share witnessed a decline from $2.49 to $1.88, largely due to inflation, high interest rates, and geopolitical uncertainties.
GPC's Global Industrial segment sales decreased by 1%, while Global Automotive segment sales increased by 5%. Despite these challenges, the company remains committed to investing in technology and operational efficiency, expecting long-term benefits from its restructuring initiatives.
Analysts from various firms have noted these developments, with some expressing cautious optimism for the company's future.
InvestingPro Insights
Recent InvestingPro data provides additional context to Genuine Parts' current situation. The company's market capitalization stands at $15.73 billion, with a P/E ratio of 18.44. This valuation comes amid challenging times, as reflected in the stock's recent performance. InvestingPro Tips indicate that GPC's stock has taken a significant hit over the last week and is trading near its 52-week low, aligning with the concerns raised in UBS's analysis.
Despite these challenges, GPC maintains some positive attributes. The company has raised its dividend for 36 consecutive years and has maintained dividend payments for 54 consecutive years, showcasing its commitment to shareholder returns. Currently, GPC offers a dividend yield of 3.54%, which may be attractive to income-focused investors.
It's worth noting that while the recent performance has been disappointing, analysts still predict the company will be profitable this year. This aligns with the InvestingPro data showing that GPC has been profitable over the last twelve months, with a revenue of $23.3 billion and an operating income margin of 7.64%.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Genuine Parts, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.