Genuine Parts Co. (NYSE: GPC) Stock is a Restart Winner

Automotive parts supplier Genuine Parts Co. NYSE: GPC shares have moved in parallel with the benchmark  S&P 500 index NYSEARCA: SPY from the pandemic panic sell-off in February to the recovery since the end of March 2020. The Company distributes automotive and industrial replacement parts through North America and Europe. The stay-in-shelter mandates took an obvious toll on business as people were in lockdown working and playing from home. However, as regions initiate the phasing in of restarts and more vehicles return to the road, Genuine Parts is a solid restart beneficiary especially as vehicle maintenance demand also rebounds. Investors looking for a recovery play may want to consider looking into shares of Genuine Parts at opportunistic pullback price levels.

Q1 2020 Earnings Release

On May 6, 2020, Genuine Parts Co. reported its Q1 2020 results for the quarter ending March 31, 2020. The Company reported diluted earnings per share (EPS) of $0.92 versus consensus (pre-COVID-19) analyst estimates of $1.09, a (-$0.17) EPS miss. Revenues saw a (-3.7%) year-over-year (YoY) downtick to $4.56 billion versus $4.54 billion consensus estimates. Management estimates that the material effects of COVID-19 resulted in a (-$0.21) diluted EPS for Q1 2020. The unprecedented collapse of the financial markets also contributed to a (-$0.10) headwind to EPS. The Company also pulled full year 2020 guidance until more transparency arises. The Company set the bar low heading into Q2 2020 earnings as the material effects of COVID-19 commenced at the end of the quarter.

Conference Call Insights

The Q1 2020 conference call shed more insights into the operations. The Company noted that sales took a strong surge in the first half of March 2020 indicating a 4% improvement YoY, but then slumped (-16%) YoY in the second half of March. This is due to the March 17, 2020 stay-in-shelter mandates that were implemented domestically and in Europe. Management stated that global supply chains were operating “well” and largely performing at pre-COVID-19 levels. Sales declines accelerated in the second half of March and the Company took initiatives to adapt to the new environment. The do-it-yourself (DIY) segment was one of the most resilient areas of business. The Company bolstered its success with same-day store delivers and touchless deliveries to commercial customers. Retail customer, it bolstered omnichannel options for online ordering and pick up curbside or in-store, next-day and ship-to-home deliveries. France accounts for 39% of European revenues which lead the downturn as isolation mandates triggered on March 17, 2020. Australia and New Zealand were bright spots as sales trends remained strong through the peak of COVID 19. 

Economic Restart Narrative

Most domestic and European regions have commenced restart initiatives as isolate restrictions get lifted. Naturally, this results in more vehicles back on the road not to mention increased maintenance demand. With bar was set very low on the Q1 2020 release, shares could be setting up for a rapid rally on Q2 2020 results due at the end of July 2020. The growing threat resurgence of COVID-19 infections is starting to cast a shadow on the restart narrative. The bullish case is if death rates diverge from the pace of infections, then markets may shrug off the rise. Since most of the new infections are occurring among younger patients (20s to 30s) with stronger immune systems, it could work to the benefit of organically establishing herd immunity. The most bullish case would be the approval of a COVID-19 vaccine, which could take until early 2021 at a minimum. The bearish case would call for new isolation mandates being established to once against curtail the spread, thereby forcing workers and consumers back home. Risk tolerant investors may want to take some exposure in Genuine Parts Co. on the bullish case belief of continued regional economic restarts that will call for greater demand for auto parts and services moving forward.

Genuine Parts Price Trajectories

Using the rifle charts on monthly and weekly time frames provides a broader view of the landscape for GPC stock. The weekly market structure low (MSL) triggered above $68.04. Shares rallied up to $83s before Q1 2020 earnings caused shares to retest the weekly MSL trigger area and rebound with a bullish weekly stochastic mini pup triggering above the $76.00 Fibonacci (fib) level. A full monthly 15-period moving average (MA) channel tightening calls for upside trajectory to the 15-pd MA at $92.49. However, a weekly market structure high (MSH) sell trigger is also set under $82.06. This can create potential opportunistic pullback levels at $80.94 monthly 5-pd MA/fib, $76.00 fib and $73.03 fib. The bar has been set low heading into the Q2 2020 earnings release at the end of July. The weekly MSH trigger under $82.06 is the line in the sand to watch and set alerts to. The bullish weekly stochastic mini pup has an upside trajectory to the upper Bollinger Bands (BBs) near the $103.09 fib area.