Standard Motor Q1 Earnings Get the Better of Estimates - Analyst Blog


Standard Motor Products Inc. ( SMP ) reported a 26.2% rise in adjusted earnings per share to 53 cents in the first quarter of 2014 from 42 cents in the year-ago quarter. Also, the number surpassed the Zacks Consensus Estimate of 47 cents. Profits went up 27.9% to $12.4 million from $9.7 million in the year-ago quarter.

Including non-operational gains and losses, earnings on a reported basis amounted to $12.4 million or 53 cents per share, compared with $9.6 million or 41 cents in the prior-year quarter. The year-over-year improvement in earnings was driven by an increase in gross margin and decrease in Selling General & Administrative expenses.

Total revenue increased 0.9% to $232.8 million, missing the Zacks Consensus Estimate of $235 million.

Gross profit improved 3.2% to 67.9 million or 29.2% of sales from $65.8 million or 28.5% of sales in the first quarter of 2013. The upside was driven by benefits from the shifting of production to low-cost areas, increased manufacturing, and savings in purchasing and successful integration of the acquisitions. Operating income increased 27.3% to $20.4 million from $16.0 million in the first quarter of 2013.

Segment Results

Revenues from the Engine Management segment climbed 2.2% to $179.3 million. The figure declined sequentially as some of the customers shifted their pipeline orders in the fourth quarter. Operating profit rose 16% to $24.5 million or 13.7% of sales from $21.2 million or 12.1% in the corresponding quarter last year.

Revenues from the Temperature Control segment declined 2.4% to $51.5 million. The segment recorded an operating income of $613,000 compared with a loss of $373,000 in the first quarter of 2013.

Revenues from the All Other segment decreased to $2 million from $2.5 million a year ago. The segment recorded an operating loss of $4.8 million against $4.6 million in the first quarter of 2013.

Financial Position

Standard Motor had cash balance of $4.4 million as of Mar 31, 2014, compared with $5.6 million on Dec 31, 2013. Long-term debt of the company stood at $43,000 as of Mar 31, 2014, down from $75,000 as of Dec 31, 2013.

In the first three months of fiscal 2014, the company had cash flow of $9.2 million from operating activities versus $26.8 million in the year-ago period. Capital expenditures rose to $2.8 million from $2.6 million a year ago.

Dividend Update

Standard Motor announced a quarterly dividend of 13 cents per share. The dividend is payable on Jun 2, 2014, to shareholders of record as of May 15, 2014.

Capital Deployment

On Apr 21, Standard Motor made an investment of $14 million in a 50/50 joint venture with Gwo Yng Enterprises, a China-based manufacturer of air conditioning accumulators, filter driers, hose assemblies, and switches. This investment will provide the company with a low-cost source of high quality temperature control products. In addition, it will help the company enhance its presence in the rapidly growing China market.

On the same day, Standard Motor also acquired certain assets and liabilities of Annex Manufacturing, which is a distributor of a wide range of temperature control products, for $11.5 million. Annex's sales in 2013 were $22 million, and Standard Motor's Temperature Control division accounted for roughly 40% of the volume. After restructuring, the Annex operations will be transferred to the Lewisville, TX facility.

The company also announced earlier that it will acquire certain assets and liabilities of Pensacola Fuel Injection, a remanufacturer of diesel fuel. The company is relocating this operation to its Grapevine, TX facility.

Zacks Rank

Standard Motor, based in Long Island City, New York, is one of the leading manufacturers, distributors and marketers of automotive replacement parts in the U.S. Standard Motor currently retains a Zacks Rank #3 (Hold).

Other better-ranked stocks worth considering include Douglas Dynamics, Inc. ( PLOW ), Remy International, Inc. ( REMY ) and Dorman Products, Inc. ( DORM ). While Douglas sports a Zacks Rank #1 (Strong Buy), Dorman and Remy carry a Zacks Rank #2 (Buy).

DORMAN PRODUCTS (DORM): Free Stock Analysis Report

DOUGLAS DYNAMIC (PLOW): Free Stock Analysis Report

REMY INTL INC (REMY): Get Free Report

STANDARD MOTOR (SMP): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: DORM , PLOW , REMY , SMP

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