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Standard Motor (SMP) Q4 Earnings Lag Estimates, Rise Y/Y

Share price of Standard Motor Products Inc.SMP fell 2.2% to $48.57 on Feb 17, as the company missed earnings and revenue estimates.

Adjusted earnings of 42 cents per share missed the Zacks Consensus Estimate of 53 cents but increased from 35 cents earned in the prior-year quarter. Adjusted earnings from continuing operations increased to $9.8 million from $8.1 million in the year-ago quarter.

Earnings from continuing operations, on a reported basis, amounted to $8.8 million or 38 cents per share, rising from $5.8 million or 25 cents in the prior-year quarter.

Total revenue also rose to $229.8 million from $205 million a year ago but missed the Zacks Consensus Estimate of $234 million.

Gross profit increased to $66.8 million from $62.8 million in the fourth quarter of 2015. Adjusted operating income excluding restructuring and integration expense improved to $14.5 million from $9.6 million in the year-ago quarter.

Standard Motor Products, Inc. Price, Consensus and EPS Surprise

Standard Motor Products, Inc. Price, Consensus and EPS Surprise | Standard Motor Products, Inc. Quote

2016 Performance

Standard Motor's adjusted earnings increased to $2.77 per share for full-year 2016 from $2.13 in 2015 but missed the Zacks Consensus Estimate of $2.88. Revenues for full-year 2016 increased to $1.06 billion from $972 million in 2015 and came in line with the Zacks Consensus Estimate.

Segment Results

Revenues at the Engine Management segment rose to $185.2 million in the reported quarter from $167.6 million a year ago. Operating profit was $18.07 million (9.8% of sales) compared with $22.4 million (13.4% of sales) in the prior-year quarter.

Revenues at the Temperature Control segment increased to $42.7 million from $36.04 million a year ago. The segment recorded an operating profit of $1.25 million (2.9% of sales) as against a loss of $3.6 million (10% of sales) in fourth-quarter 2015.

Revenues at the All Other segment increased to $1.9 million from $1.3 million a year ago. The segment recorded an operating loss of $5.2 million, narrower than $6 million in the fourth quarter of 2015.

Financial Position

Standard Motor had cash balance of $19.8 million as of Dec 31, 2016, compared with $18.8 million as of Dec 31, 2015. Total debt of the company was $163,000 as of Dec 31, 2016, compared with $78,000 as of Dec 31, 2015.

In 2016, Standard Motor had cash flow of $97.8 million from operating activities compared with $65.2 million in the prior-year period. Capital expenditures were $20.9 million, up from the year-ago level of $18.05 million.

Business Update

Standard Motor is benefiting from the acquisition of General Cable. The company has maintained the customer base and improved the shipping performance. It is also integrating the sales and administration function and the distribution has been relocated to the wire facility in Edwardsville, KS. All these strategies are generating significant savings.

Additionally, the company has started shifting production from the acquired Nogales, Mexico, wire set assembly operation to its existing wire assembly business in Reynosa, Mexico and will complete the same by the end of first quarter of 2018. Following this, it will close the Nogales plant.

Standard Motor will also close electronics operation in Orlando, FL and shift it into the existing facility in Independence, KS. The company is undertaking this strategy due to declining sales of products produced in the Orlando factory. This will lead to restructuring costs of $3.7 million and will generate annual savings of $3 million.

Dividend

Standard Motor's board approved an increase in dividend to 19 cents per share from 17 cents, paid earlier. The dividend will be paid on Mar 1, 2017. With this, the company has increased dividend for eight consecutive years.

Also, the board approved a share repurchase of $20 million under the new share repurchase policy.

Price Performance

Standard Motor has underperformed the Zacks categorized Auto/Truck Replacement Parts industry in the last three months. During this period, the company's share price has declined 4.5%, while the industry saw a 2% increase. Share price was adversely affected due to costs associated with the closure and shifting of operation.

Zacks Rank & Key Picks

Standard Motor Motors currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Honda Motor Co., Ltd. HMC , Fox Factory Holding Corp FOXF and General Motors Company GM . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

For the current year Honda, Fox Factory, and General Motors expect earnings growth rate of around 27%, 16.6% and 9.4%, respectively.

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Honda Motor Company, Ltd. (HMC): Free Stock Analysis Report

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Fox Factory Holding Corp. (FOXF): 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.


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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