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What’s in the Cards for Genuine Parts (GPC) in Q1 Earnings?


Genuine Parts Company GPC is set to report first-quarter 2018 results before the opening bell on Apr 19.

Last quarter, the company delivered a positive surprise of 0.9%. Over the trailing four quarters, it topped estimates twice, while missing the same in the other two, with an average surprise of a negative of 1.79%.

Shares of Genuine Parts have underperformed the industry it belongs to in the last three months. The stock has lost 13.5% compared with the industry’s 10.3% decline.

Genuine Parts Company Price and EPS Surprise

Let’s see, how things have shaped up for the upcoming announcement.

Factors Influencing This Quarter

The company regularly undertakes acquisitions to expand the business. In November 2017, Genuine Parts completed the acquisition of Alliance Automotive Group ("AAG"), the second largest parts distribution platform in Europe. This assisted the company to expand footprint in the European markets. This has also aided it to raise future expectations. The to-be-reported quarterly results are likely to be positively impacted by the contribution from AAG's operations.

Further, to boost top-and bottom-line growth, the company is focusing to expand the product line to penetrate new markets.

However, rising cost of labor and delivery, as well as ongoing planned IT spending, is resulting in a continuous rise of its Selling, General and Administrative (SG&A) expenses that are hampering the gross margin figure.

Also, the company’s long-term debt increased to $2.6 billion in 2017 in comparison with $550 million in the prior year. High debt means that a huge share of Genuine Parts earnings will be given to the debt holders as interest, thereby lowering contributions for shareholders.

Earnings Whispers

Our proven model does not conclusively show that Genuine Parts is likely to beat on earnings this quarter. This is because, a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Genuine Parts has an Earnings ESP of -0.38% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.31 and $1.32, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Genuine Parts carries a Zacks Rank of 3, which increases the predictive power of ESP. However, this combined with its Earnings ESP makes surprise prediction difficult. Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few auto stocks worth considering, comprising the right combination of elements to deliver an earnings beat this time around:

Cummins Inc. CMI has an Earnings ESP of +0.20% and a Zacks Rank #2. The company’s first-quarter 2018 financial results are expected to be released on May 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BorgWarner Inc. BWA has an Earnings ESP of +5.29% and a Zacks Rank of 2. The company will report first-quarter 2018 financial figures on Apr 26.

Oshkosh Corporation OSK has an Earnings ESP of +4.39% and is a Zacks #3 Ranked player. The company’s second-quarter fiscal 2018 financial numbers are to be announced on Apr 26.

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