GPC Genuine Parts Co

Standard Motor Product Inc. (SMP) reported a staggering 82.6% rise in adjusted earnings per share to 42 cents in the first quarter of 2013 from 23 cents in the year-ago quarter. Earnings per share also surpassed the Zacks Consensus Estimate of 32 cents. Profits went up 79.6% to $9.7 million from $5.4 million in the year-ago quarter.

Total revenue increased 9% to $230.7 million, missing the Zacks Consensus Estimate of $234.0 million. The year-over-year growth in revenues was attributable to the positive impact from the company’s acquisitions and strong performance of the company’s Temperature Control segment.

Gross profit improved 20.7% to $65.8 million or 28.5% of sales from $54.6 million or 25.8% in the first quarter of 2012. The rise in profit was driven by higher in-house production, reduced purchase costs, and expansion of production in low-cost manufacturing operations in Mexico and Poland.

Operating income increased 65.2% to $16.0 million from $9.7 million in the first quarter of 2012. Operating margin was 6.9% versus 4.6% in the year-ago quarter.

Segment Results

Revenues from the Engine Management segment rose 7.7% to $175.5 million, driven by increased pipeline orders. Operating profit grew 51.1% to $21.2 million from $14.0 million in the corresponding quarter last year.

Revenues from the Temperature Control segment climbed 16.4% to $52.7 million, due to favorable impacts from the acquisition of Compressor Works. The company recorded an operating loss of $373.0 million compared with an operating profit of $67.0 million in the first quarter of 2012.

Financial Position

Standard Motors had cash balance of $9.7 million as of Mar 31, 2013, compared with $13.1 million in Dec 31, 2012. Long-term debt of the company was $163 thousand as of Mar 31, 2013, down from $195 thousand as of Dec 31, 2012.

In the first quarter of fiscal 2013, the company had cash outflow of $26.8 million from operating activities compared with $9.0 million in the year-ago period. Capital expenditures increased to $2.6 million from $2.4 million a year ago.

Dividend

The company will be paying a quarterly dividend of 11 cents per share on the outstanding common stock on Jun 3, 2013 to shareholders of record as of May 15, 2012.

Our Take

Standard Motor, based in Long Island City, N.Y, is one of the leading manufacturers, distributors and marketers of automotive replacement parts in the U.S. Further, it enjoys strong brand recognition globally.

We believe that Standard Motor will benefit from its strong brand recognition, less cyclical end-market and efficient debt management measures and positive impact from the recent acquisitions. However, we are concerned about the company’s high dependence on its customers including Advance Auto Parts Inc. (AAP) for its business. Currently, the company retains a Zacks Rank #1 (Strong Buy).

Some other stocks that are performing well in the industry where Standard Motor operates include Genuine Parts Company (GPC)  with a Zacks Rank #1 (Strong Buy), and LKQ Corp. (LKQ) carrying a Zacks Rank #2 (Buy).
 

 
ADVANCE AUTO PT (AAP): Free Stock Analysis Report
 
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STANDARD MOTOR (SMP): Free Stock Analysis Report
 
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