Standard Motor's Q2 Earnings Lag Estimates, Improve Y/Y - Analyst Blog

By Zacks Equity Research,

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Standard Motor Products Inc. ( SMP ) reported an 8.6% rise in adjusted earnings per share to 76 cents in the second quarter of 2014 from 70 cents in the year-ago quarter. However, earnings missed the Zacks Consensus Estimate of 79 cents. Profits went up 8.4% to $17.7 million from $16.4 million in the year-ago quarter.

Including litigation charge and other non-operational gains and losses, earnings on a reported basis amounted to $11.2 million or 48 cents per share, compared with $16.4 million or 71 cents in the prior-year quarter.

Total revenue increased 0.9% to $272.5 million, missing the Zacks Consensus Estimate of $290 million.

Gross profit decreased to $77.4 million or 28.4% of sales from $77.8 million or 28.8% of sales in the second quarter of 2013. Meanwhile, operating income improved 4.9% to $28.6 million from $27.2 million in the second quarter of 2013. The company is actively focusing on reducing selling general and administrative (SG&A) expenses, along with attaining better efficiency and implementing cost-control initiatives.

Standard Motor Products, Inc - Earnings Surprise | FindTheBest

Segment Results

Revenues at the Engine Management segment climbed 1.2% to $184.2 million. Operating profit rose 11.5% to $27.6 million or 15% of sales from $24.8 million or 13.6% of sales in the corresponding quarter last year. Gross margin increased to 30.4% from 29.9% a year ago, driven by higher production, savings in purchasing, and benefits from recent acquisitions.

Revenues at the Temperature Control segment declined 1.2% to $85.7 million. The segment recorded an operating income of $5 million or 5.9% of sales, down from $6.9 million or 8% of sales in the second quarter of 2013. Gross margin decreased to 21.4% from 23.5% a year ago owing to reduced production in order to manage inventory levels.

Revenues at the All Other segment increased 90.6% to $2.7 million from $1.4 million a year ago. The segment recorded an operating loss of $4.1 million against $4.5 million in the second quarter of 2013.

Financial Position

Standard Motor had a cash balance of $6.2 million as of Jun 30, 2014, compared with $5.6 million as on Dec 31, 2013. Long-term debt of the company stood at $32,000 as of Jun 30, 2014, down from $75,000 as of Dec 31, 2013.

In the first half of fiscal 2014, the company had cash flow of $17.6 million from operating activities versus cash used of $12.4 million in the year-ago period. Capital expenditures rose to $6.4 million from $5.6 million a year ago.

Dividend Update

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

Acquisitions and JV

Earlier this year, Standard Motor announced two acquisitions. The first takeover was that of Pensacola Fuel Injection, a remanufacturer of diesel fuel. The company also acquired certain assets and liabilities of Annex Manufacturing, a distributor of a wide range of temperature control products. The company expects the acquisitions to boost earnings in the future, excluding the one-time transition costs.

Further, Standard Motor announced a 50/50 joint venture (JV) with Gwo Yng Enterprises - a China-based manufacturer of air conditioning accumulators, filter driers, hose assemblies, and switches.

Zacks Rank

Standard Motor, based in Long Island City, NY, is one of the leading manufacturers, distributors and marketers of automotive replacement parts in the U.S. The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks that are worth considering in the auto sector include Visteon Corporation ( VC ), Accuride Corp. ( ACW ) and American Axle & Manufacturing Holdings Inc. ( AXL ). Visteon sports a Zacks Rank #1 while Accuride and American Axle carry a Zacks Rank #2 (Buy).

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: AXL , SMP , VC , ACW

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