On Nov 29, 2013, we maintained our Neutral recommendation on
Standard Motor Products Inc.
). The reiteration was based on improving earnings, strong brand
recognition, recent acquisitions and savings through optimization
of product costs, which offset the headwinds.
Why the Reiteration?
Standard Motor reported an 8.2% rise in adjusted earnings per
share to 79 cents in the third quarter of 2013 from 73 cents in
the year-ago quarter. Earnings per share beat the Zacks Consensus
Estimate of 76 cents.
Standard Motor enjoys a strong competitive advantage due to
its brand recognition and sizeable customer base. Moreover, the
company is expanding its business through acquisitions.
Further, Standard Motor is not significantly exposed to the
cyclical nature of the automotive industry since it is focused on
the aftermarket. Demand for repair products are expected to rise,
thanks to the increasing number of vehicle models with different
features, increased complexity in modern vehicles, expansion of
the used vehicles market and an increase in the average auto age
in the U.S.
However, rising demand for fuel efficient vehicles or electric
vehicles can mar aftermarket sales and hamper the long-term
performance of Standard Motor. Moreover, the company is adversely
affected by the price competition in the market.
Standard Motor's sales are mostly concentrated on its major
O'Reilly Automotive Inc.
), NAPA Auto Parts and
Advance Auto Parts Inc.
). The top 5 customers of the company represented about 64% of
consolidated net sales in 2012.Thus, the loss of any key customer
could significantly affect the company's results.
Other Stocks to Consider
Standard Motor currently carries a Zacks Rank #2 (Buy).
Motorcar Parts of America Inc.
), which carries a Zacks Rank #1 (Strong Buy), is another stock
worth considering in the same industry.
ADVANCE AUTO PT (AAP): Free Stock Analysis
MOTORCAR PARTS (MPAA): Free Stock Analysis
O REILLY AUTO (ORLY): Free Stock Analysis
STANDARD MOTOR (SMP): Free Stock Analysis
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