Genuine Parts Co. (GPC) has undertaken various initiatives such as product line expansion, penetration into new markets and acquisitions 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 electronic and industrial parts businesses are showing impressive performance and it has a strong balance sheet. However, our optimism is dampened by the sluggish automotive and office products industries in the U.S. Considering these factors, we maintain our Hold recommendation with a target price of $43.
Genuine Parts relies on a diverse product portfolio for top-line and bottom-line growth. For 2008, the company expects overall revenue growth of 3%-5%. The company made many acquisitions during the first six months of 2008. It spent $67 million for the acquisitions during the period, which accounted for 1% of total sales growth.
However, slowing growth in the Automotive Parts segment remains an overhang on GPC's prospects. Product improvements by original equipment manufacturers (OEM) and other technological advancements are slowing the pace of revenue growth in the replacement parts sector.
On August 18, Genuine Parts Company announced that its Office Products group, S.P. Richards Company, has signed a definitive agreement to purchase the mid-western U.S. business assets of ActionEmco, a regional office products wholesale distributor.
Read the full analyst report on GPC
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