We are reiterating our Outperform recommendation on
Standard Motor Product Inc
). The leading manufacturer and distributor of automotive
replacement parts continue to benefit from strong brand
recognition and a less cyclical auto and auto parts industry.
ADVANCE AUTO PT (AAP): Free Stock Analysis
O REILLY AUTO (ORLY): Free Stock Analysis
STANDARD MOTOR (SMP): Free Stock Analysis
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Standard Motor, in the third quarter of 2012, reported a 23.7%
growth in adjusted earnings per share to 73 cents from 59 cents
in the year-ago quarter, surpassing the Zacks Consensus Estimate
by 9 cents. Profits surged 22.6% to $16.8 million from $13.7
million in the corresponding quarter last year.
Total revenues increased 16.8% year over year to $276 million,
beating the Zacks Consensus Estimate of $258 million. The growth
was attributable to the positive impact from the company's recent
acquisitions and strong performance of its Temperature Control
Standard Motor benefits from its strong brand recognition and
wide customer base. The company distributes products under
Standard, Blue Streak, BWD Automotive and Niehoff brand for its
Engine Management division. Under Temperature Control division,
it distributes products under Hayden and Four Seasons brand. It
also distributes products under private brands like CARQUEST and
NAPA Auto Parts for both the segments.
With greater focus on aftermarket, the company is not
significantly exposed to the cyclical automotive industry. The
company is expected to benefit from the rising demand of repair
products due to the improved used vehicles market, increase in
the number of automobiles on the road and rise in the average
auto age to 10.8 years in the U.S.
In addition, the company will reap the benefits from the recent
acquisition of BLD, Forecast Trading and Compressor Works. The
acquisition will enhance its revenues and reduce the costs of
products by further emphasizing on low cost regions.
However, Standard Motor faces challenges from concentrated
customer base. The top five customers including
Advance Auto Parts Inc.
O'Reilly Automotive Inc.
) accounts for more than 10% of the company's sales. Any
fluctuation may have an adverse effect on the company's results.
Our Outperform recommendation on the stock is backed by a Zacks
#1 Rank, which translates into a short-term (1 to 3 months)
Strong Buy rating.