Genuine Parts is Monday's IBD Stock Of The Day as the distributor of auto and industrial replacement parts breaks past a buy point on momentum from last week's earnings beat. GPC is leading a move higher by auto-parts retailers, with O'Reilly Automotive and AutoZone also breaking out to new highs.
On Thursday, Genuine Parts posted Q3 earnings per share of $2.23, up 19% from a year ago and 18 cents ahead of estimates. Revenue grew 18% to $5.675 billion.
GPC boosted guidance for full-year EPS to a range of $8.05-$8.15, from $7.80-$7.95.
Earnings from O'Reilly are due after the close on Wednesday. AutoZone was featured as the IBD Stock Of The Day on Oct. 13.
Auto Parts: Recession- And Inflation-Proof
The overall inflationary, supply-constrained environment is a positive one for Genuine Parts and its peers, CEO Paul Donahue told analysts on the Oct. 20 earnings call. "Limited new-car inventory and elevated used-car prices are all supportive of healthy demand in the aftermarket" for parts.
Whether because of high prices or recessionary worries, people are deciding to squeeze more mileage out of their existing vehicles. The average age of vehicles on the road is at a 12-year high, he said.
Vehicle age is a key driver for the group, as is annual vehicle miles driven. "We are seeing an uptick in miles driven as fuel prices moderate just a bit," Donahue said. He also expects employees' return to the workplace to provide a tailwind, partly because people are "a bit hesitant to get on mass transit."
GPC Stock
GPC stock jumped 3.9% to 166.94 on Monday in weak trade, clearing a 165.09 buy point from a flat base, according to a MarketSmith analysis.
After Thursday's Q3 earnings report, GPC stock wavered, falling below its 50-day moving average intraday before closing off 0.7% for the session. Asked whether guidance for Q4 reflected conservatism, CFO Bert Nappier confessed to "a little modesty" amid a choppy economic environment.
Then GPC stock got back in gear on Friday, cruising ahead 2.8%. Still, even after a breakout to new highs, GPC stock is only about 7% above its 10-week/50-day line, meaning it doesn't appear too extended.
Monday soft volume is worth noting. But GPC's relative strength line — the blue line in the accompanying chart, which tracks the stock's progress vs. the S&P 500 — is breaking out to a new high. That corroborates the stock's breakout, suggesting leadership, rather than a move that's simply tracking the broader market action.
The Retail/Wholesale-Auto Parts group has been in the market's top tier for months. As of Friday, the group is ranked No. 28 out of 197 based on stock price performance and momentum.
ORLY stock rose 3% on Monday, clearing a 750.98 flat-base buy point. AZO stock shot up 4.6% to 2406.59, past a 2362.34 buy point.
Genuine Parts = NAPA + Motion
Genuine Parts' auto parts division, which operates under the NAPA brand in the U.S. and increasingly in Europe, accounted for 61% of revenue in Q3. The Motion industrial parts division got a lot bigger with the $1.3 billion cash acquisition of Kaman Distribution Group last December.
GPC cited broad-based industrial growth, with strength in industries including food, chemicals, aggregates and cement, mining, and oil and gas.
Donahue said Motion's focus has expanded to include the distribution center market, adding conveyors to the company's product line. The automation and robotics segment has been growing by double-digit percentages, he said. Motion's broadened focus beyond power transmission and industrial supplies should "shelter us going forward" from economic weakness, Donahue said.
