These days, there aren't too many Strong Buys among automakers and auto supply stocks, but Zacks senior auto industry analyst does see some positive elements relating to Genuine Parts Company (GPC), on which he is keeping his Hold recommendation for now:
'Genuine Parts Company has undertaken various initiatives such as product line expansion, penetration into new markets, and cost-saving activities to boost sales and earnings. Genuine Parts has been diversifying its revenue base to reduce excessive dependence on the automotive replacement market.
'The company's industrial businesses are improving as the U.S. economy is recovering. The balance sheet is strong. However, our optimism is dampened by the slowdown in the replacement market and rising input prices.
'Considering these factors, we maintain our Hold recommendation with a six-month target price of $51.00. Currently, shares of Genuine Parts are trading at 16.0x our 2007 EPS estimate of $3.00, below the industry median of 16.3x. The company's ability to generate cash flow and improve its growth makes us optimistic about the stock's performance, though weak pricing and a soft Automotive and Industrial Parts businesses are hindering progress. Accordingly, by using our 2007 EPS estimate and a forward multiple of 17.0x, we set our six-month target price.'
Read the full analyst report on GPC.
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