Dividend King Genuine Parts Company Upgraded On Profit Guidance

Key Points

• Genuine Parts Company bottoms on robust long-term guidance. 
• The analysts praise the news and raise targets. 
• Auto part retailers echo the strength and support the outlook. 

 Genuine Parts Company NYSE: GPC is hosting an investor day event, and the pre-event press release already excites the analysts. The release reaffirmed the dividend king and its 2023 targets and gave a long-term forecast well above the Marketbeat.com consensus. The company expects earnings for 2023 to fall into a range bracketing the consensus, but the 6-7% 3-year revenue CAGR and 10-11% expected earnings are not. On the top line, the guidance is more than $1.5 billion above expectation at the low end of the range; that’s a difference of 6% and is compounded by an EPS target above consensus—great news for the dividend. 

"We are building on our strong momentum and investing in our businesses to create value and unlock the power of One GPC," said Paul Donahue, Chairman and Chief Executive Officer. "Our rich culture, global scale and strategic execution provide us with unique opportunities for profitable growth and strong cash flow, and we are excited for the future of Genuine Parts Company."

The Analysts' Chatter Is Already Perking Up 

The guidance is already spawning new targets from the analyst, and more can be expected. The first to show up on Marketbeat’s analyst tracking page comes from Truist, which upgraded the stock to Buy from Hold and gave a price target of $186. That’s about 20% above the pre-announcement price and well above the consensus target. 

“In our view, elevated vehicle prices will continue to force consumers to invest in maintaining/repairing their existing vehicles rather than purchasing something else,” said Truist analysis Scot Cicarelli. “In addition, we believe same-SKU inflation will likely surprise to the upside in ’23, providing incremental upside sales potential.”

The consensus is a Hold, weakening ahead of the release despite upward pressure in the price target. The consensus price target is trending upward but assumes the stock is fairly valued at the current levels. Assuming the analysts continue to up their targets and ratings due to the new guidance, we can assume the Hold rating will firm, and the price target will continue to support the price action. 

The institutional activity has been mixed over the last year, but they are buying on balance, and their purchases hit new heights in Q1 2023. This brings total ownership up to 78% and growing, with names like B. Riley Wealth Advisors making multiple purchases during the quarter. 

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Autoparts Retailers Have Strong Q1, Affirm GPC Targets 

Auto parts retailers like Autozone NYSE: AZO, Advance Auto Parts NYSE: AAP, and O’Reilly Automotive NYSE: ORLY  all released q1 reports that back up the outlook for GPC. They all beat on the top and bottom lines due to volume and prices that have profits outpacing the consensus estimates. This strength in business is expected to continue, although the strength in results may be getting priced into the stocks. 

Shares of Genuine Parts Company have corrected ahead of the investor day event but may have already hit bottom. The risk is that price action is muted following a heavy down day and has formed a questionable signal. The signal pattern is a Harami, meaning change or continuation. If the market can not hold the current level, a move to $148 or lower is possible. If support is confirmed at this level, shares of GPC should trend sideways in consolidation until more news is available.