Genuine Parts: Solid Earnings But Economic Uncertainties Remain

Key Points

• Genuine Parts stock is trying to hold on to gains after a solid earnings report in which the company reaffirmed its full-year guidance.
• However, the guidance does not include any impact from tariffs and acknowledged the guidance could be revised lower as data warrants.
• GPC stock has an attractive valuation and its dividend is supported, which could make it an attractive value play.

Genuine Parts Co. NYSE: GPC stock is holding on to gains of around 1% after posting a double beat on earnings on Apr. 22. The stock climbed nearly 5% (4.7%) in pre-market trading. The company also reaffirmed its guidance for the full year. However, in doing so, it was noted that, for now, it was not factoring in any impacts from tariffs.

That echoes what investors have heard from many companies since earnings season kicked off. Due to the uncertainty, companies are either not issuing forward guidance or, like GPC, putting a big asterisk on their guidance.

In fairness, companies aren’t required to offer guidance. But it has become an expectation of analysts and investors. A company’s quarterly results are always backward-looking. Analysts are more interested in where a company is likely to go than where it has been.

Growth Through Acquisition Helps Results

Revenue of $5.9 billion exceeded estimates for $5.83 billion by about 1% and was 2% higher year-over-year (YOY). Earnings per share (EPS) of $1.75 beat estimates of $1.66 by 5%. However, on a YOY basis, EPS was down about 21%.

The company also announced a full-year 2025 dividend of $4.12 per share. That’s up 3% from the prior year, making it 69 consecutive years of dividend increases for this dividend king. There are concerns that the company’s dividend payout ratio is getting a little uncomfortable. However, the company announced it still has the capacity to repurchase 7.5 million shares, which could be done to help navigate economic uncertainties.

Genuine Parts acquired 44 stores from independent owners and competitors in the quarter. The company stated that these acquisitions strengthened its footprint in priority markets. Additionally, Genuine Parts continues to benefit from the company’s 2024 acquisitions of MPEG and Walker.

One of those positive impacts can be seen in the company’s gross margin, which climbed to 37.1%. This is after its adjusted gross margin had climbed 50 basis points to 36.9% in the prior quarter.

Tariffs Could Mute the Potential for Rising Demand

Genuine Parts is considered a solid choice among retail stocks because the current trade war will make new and used cars more expensive. Heading into 2025, the belief was that lower inflation and lower interest rates would spark vehicle demand.

However, with the Federal Reserve taking a more cautious approach towards interest rates and potential tariff pressures, consumers are rethinking their view of big-ticket purchases. That means many consumers will look to keep their current vehicle in good shape, which would seem to favor companies that sell car parts, which should be a winner.

However, many of those auto parts have tariff exposure. The company stated in its release that, while maintaining its current full-year guidance, it “does not include any impact from tariffs in 2025.” The company noted that tariffs could lead to higher salaries, wages, and rent, as well as volatility in interest rates and foreign currency rates. The company chose to wait until after the 90-day pause to reassess guidance.

GPC Could Be a Long-Term Winner If You Can Handle the Current Volatility

The Genuine Parts analyst forecasts on MarketBeat give GPC a Hold rating. This likely considers the uncertainty surrounding the company’s guidance, which can have a range of outcomes. However, the consensus price target of $131 is 14% higher than the stock’s price on Apr. 22. And, when factoring in a dividend yield of 3.6%, GPC stock has some appeal.

Adding to its appeal is the company’s forward price-to-earnings (P/E) ratio of around 14x. That’s well below the company’s five-year average of 17.96x and could be a target for value-conscious investors.