Standard Motor Products, Inc. (
SMP has been on the Zack's radar for some time now and recently
moved back into the Zacks Rank 1 spot. Back in early November
with the stock around $18, we noted the parts company as a good
value play with a forward price to earnings multiple of 12.8 and a
moderate dividend yield of 1.5%. It was also cited for
its momentum and growth about 40 days later.
SMP earned recognition through a string of earnings beats and
stable growth after the Great Recession of 2008 and automotive
bailouts. SMP proved itself to not only be a survivor, but a
thriving company with room to grow.
Company Description & Developments
Standard Motor is a small cap company that makes replacement parts
for the automotive aftermarket industry. It has 2 major segments,
Engine Management, which manufactures a full line of engine
management related products, and Temperature Control, which makes
replacement parts for car air conditioning and heating systems.
They distribute parts under our own brand names, such as
Standard, BWD, Hayden and Four Seasons, and through private labels
around the world.
Last quarter the company reported Earnings per share of 59 cents
compared with the consensus of 48 cents. Earnings were just 43
cents a year ago. This strength came predominantly via the
Engine Management Segment.
Sales rose 3.8% to $236.2 million from $227.5 million in the
third quarter of 2010. The Engine Management segment led the
quarter, with sales rising 7.6%.
Back on November 1, Standard beat Zacks consensus estimates by 23%
and surprised analysts for the 6th quarter in a row. They
will be releasing Q4 results later today and expectations are for
SMP to earn 16 cents a share. Their earnings date was
pushed back a bit from its original release due late last
Standard Motor Products' profit has risen year over year by an
average of 37.6% over the past five quarters. Revenue has now gone
up for three straight quarters and analysts are looking for growth
to exceed 11% in the coming year (FY2012).
Given the strength in sales and pricing that we have been seeing
across the automotive industry, it would be logical that Standard
Motor will reap those benefits. We also saw strength in the
parts companies like Auto Zone and O'Reilly Auto Parts.
After the Report
Normally we wouldn't write about a stock reporting that day, but
with SMP, I believe there are three ways a prospective investor can
look at the situation.
1. If the report is good or in-line with estimates and
guidance for the future is in-line or better that expectations, you
may see a pullback in the stock, which would allow for a more
2. If the report blows away estimates and forward
guidance is at the top of the range or better shares may move
higher. Even with a move higher, the value will remain and the
stock may gain momentum in the days and weeks following the
3. If the report is just plain lousy and they miss on
all levels, then perhaps it may be time to reevaluate this position
and look for another stock.
The possibility of a completely devastating report that misses
estimates sharply is low; but remembers that weather has been
mild this winter (their Temperature Control segment was weak
last quarter) and economic growth is still spotty and slow.
Regardless, SMP represents a stock that could still have some
serious value in a market that remains cautiously bullish with a
P/E that is below the market historical average of 15 and a stable
recent history of earnings growth.
Shares are above the 50 and 200 day moving averages, which you
can look to for support on a move lower.
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He
is also the Editor in charge of the market-beating
Zacks Whisper Trader Service.
STANDARD MOTOR (
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