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Genuine Parts (GPC) to Report Q3 Earnings: What's in Store?

Genuine Parts Company GPC is slated to release third-quarter 2020 results on Oct 22, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.48 per share on revenues of $4.39 billion.

This Atlanta-based automotive replacement parts supplier delivered better-than-expected earnings in the last reported quarter. The bottom line, however, declined from the year-ago profit level. Weak contribution across both major segments of the company had resulted in this underperformance. High operating costs also dragged down profits.

Over the trailing four quarters, Genuine Parts has surpassed estimates on three occasions and missed in the other, the average surprise being 4.81%. This is depicted in the graph below:

Genuine Parts Company Price and EPS Surprise

Genuine Parts Company Price and EPS Surprise

Genuine Parts Company price-eps-surprise | Genuine Parts Company Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for Genuine Parts’ third-quarter earnings per share has moved up nine cents in the past 60 days. However, this compares unfavorably with the year-ago quarter’s earnings of $1.50 per share. The Zacks Consensus Estimate for quarterly revenues also suggests a year-over-year decline of 12.5%.

Earnings Whispers

Our proven Zacks model does not conclusively predict an earnings beat for Genuine Parts this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here as elaborated below.
 
Earnings ESP: Genuine Parts has an Earnings ESP of -0.94%. This is because the Most Accurate Estimate is pegged one cent lower than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Genuine Parts currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors

With the coronavirus pandemic rattling the auto industry, sales in Genuine Parts’ Industrial Parts segment might have been affected during the September-end quarter. Supply-chain disruptions and factory closures have thwarted demand for industrial replacement parts in industries such as equipment and machinery, iron and steel, pulp and paper and automotive. This is likely to have dented the segment’s revenues during the third quarter. The Zacks Consensus Estimate for quarterly revenues from the Industrial Parts unit is pegged at $1,367 million, indicating a decline from the $1,732 million reported in the year-ago quarter.

Remarkably, with the gradual reopening of the economy, the demand for automotive replacement parts is eventually recovering and rebounding to the previous high levels. Thus, Automotive Parts Group, the largest segment of Genuine Parts, is anticipated to have contributed to the company’s operating margin, and consequently, the bottom line during the quarter under review. The Zacks Consensus Estimate for this segment’s quarterly net sale is pinned at $3,031 million, higher than the $2,790 million recorded in third-quarter 2019.

Further, Genuine Parts’ continued cost-containment initiatives in the July-September quarter are likely to have boosted cash flow and offered some respite from the pandemic-induced financial crisis.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Ford Motor Company F has an Earnings ESP of +19.51% and flaunts a Zacks Rank #1, at present. It is scheduled to report earnings results on Oct 28.
 
Gentex Corporation GNTX has an Earnings ESP of +1.94% and carries a Zacks Rank of 3 currently. The company is set to announce quarterly figures on Oct 23.

Cooper Tire Rubber Company CTB has an Earnings ESP of +19.84% and currently sports a Zacks Rank #1. The company is slated to release quarterly numbers on Oct 29.

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Ford Motor Company (F): Free Stock Analysis Report
 
Cooper Tire Rubber Company (CTB): Free Stock Analysis Report
 
Genuine Parts Company (GPC): Free Stock Analysis Report
 
Gentex Corporation (GNTX): Free Stock Analysis Report
 
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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.

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