What's In Store For Genuine Parts (GPC) In Q4 Earnings?

Genuine Parts Company GPC is set to report fourth-quarter and fiscal 2017 results before the opening bell on Feb 21.

Last quarter, the company delivered a negative surprise of 9.4%. In the trailing four quarters, it beat and missed estimates twice, leading to an average earnings miss of 1.8%.

Shares of Genuine Parts have outperformed the industry it belongs to in the last three months. The stock has gained 17.4%, compared with the industry’s 10.1% rally.

Genuine Parts Company Price and EPS Surprise

Let’s see, how things have shaped up for the upcoming announcement.

Factors Influencing This Quarter

In fiscal 2017, Genuine Parts anticipates its annual sales growth rate in the range of 4-4.5%, while adjusted earnings per share on a diluted basis is anticipated to be in the range of $4.55-$4.6.

The company frequently undertakes acquisitions to expand its business. In November 2017, it completed the acquisition of Europe's Alliance Automotive Group (AAG) for a total price of roughly $2 billion. The acquisition will enable Genuine Parts to enter the European market through AAG’s large chain of stores and its geographical presence across the continent.

Further, to boost top and bottom-line growth, the company is focusing to expand its product line to penetrate new markets.

However, the company’s rising Selling, General and Administrative (SG&A) expenses, due to rising cost of labor and delivery as well as ongoing planned IT spending, are hampering its profit margins. Also, its high proportion of inventory might affect the short-term liquidity of the company during low sales.

For the soon-to-be-released quarterly results, the Zacks Consensus Estimate for net sales of the Automotive segment is pegged at $2.21 billion, up from the third quarter’s actual total revenues of $2.17 billion.

Similarly, the Zacks Consensus Estimate for net sales of the company’s Industrial segment is pegged at $1.18 billion, up from the third quarter’s actual figure of $1.24 billion.

The Zacks Consensus Estimate for net sales of Office Products segment stands at $473 million, up from the third quarter’s actual net sales of $510 million. While the same for net sales in the Electrical/Electronic Materials segment is pegged at $190 million, down from the third quarter’s actual net sales of $199 million.

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 favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Genuine Parts has an Earnings ESP of 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.09. 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 of 2, which increases the predictive power of ESP. However, this combined with its Earnings ESP makes the surprise prediction difficult. Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few auto stocks worth considering from the same space, comprising the right combination of elements to come up with an earnings beat this time around:

Magna International, Inc. MGA has an Earnings ESP of +1.27% and a Zacks Rank #3. The company’s fourth-quarter 2017 financial results are expected to be released on Feb 22. You can see the complete list of today’s Zacks #1 Rank stocks here.

LKQ Corporation LKQ has an Earnings ESP of +0.92% and a Zacks Rank of 2. The company will report fourth-quarter 2017 financial figures on Feb 22.

Spartan Motors, Inc. SPAR has an Earnings ESP of +3.85% and is a Zacks #3 Ranked player. The company’s fourth-quarter 2017 financial numbers are supposed to be announced on Mar 1.

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