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On Friday, Evercore ISI analysts upgraded Genuine Parts Company (NYSE:GPC) stock from In Line to Outperform, increasing the price target to $135 from $128. The upgrade reflects a positive outlook on the company’s potential to manage tariff impacts effectively and capitalize on market opportunities. According to InvestingPro data, GPC currently trades near its 52-week low of $112.74, with an overall financial health score rated as "GOOD" based on comprehensive analysis of multiple factors.
Analysts at Evercore ISI highlighted Genuine Parts’ ability to navigate the tariff landscape, noting the company’s capacity to pass on rising costs in both its Auto and Industrial segments. They pointed out that Genuine Parts could even see an earnings boost from tariffs. The company currently trades at a P/E ratio of 18.3x, with a solid gross profit margin of 36.3%. With end markets largely depressed, analysts believe that the risks associated with a volatile low-income consumer base and tariffs are already reflected in the current stock price.
The firm also recognized the strategic position of Genuine Parts to gain market share from competitors, specifically mentioning the potential for the company to attract independents from the CarQuest network to NAPA. This opportunity arises from store closures by Advance Auto Parts (NYSE:AAP), which could benefit Genuine Parts.
In addition to market dynamics, Evercore ISI cited Genuine Parts’ ongoing restructuring efforts as a reason for the upgrade. These efforts are expected to yield significant cost savings, with an estimated $100-125 million (40-60 basis points of EBIT margin) of incremental savings projected through 2026.
The analysts’ base case of $135 represents a 16 times multiple on the forecasted C26 EPS, indicating a 12% upside from the current level. They also pointed out the attractive 3.4% dividend yield that Genuine Parts offers, which adds to the stock’s appeal in what they describe as a volatile global environment. Notably, InvestingPro data reveals that GPC has maintained dividend payments for 55 consecutive years and has raised its dividend for 37 consecutive years, demonstrating remarkable financial stability.
Evercore ISI’s revised outlook for Genuine Parts comes with an anticipation that U.S. manufacturing could benefit from onshoring trends. They suggest that increased capacity utilization and potential new projects in the Industrial sector could further support the company’s growth. With the next earnings report due on April 17, investors can access comprehensive analysis and detailed financial metrics through the Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks including GPC.
In other recent news, Genuine Parts Company reported its fourth-quarter 2024 earnings, showing mixed results with an earnings per share (EPS) of $1.61, slightly missing the forecast of $1.64, but exceeding revenue expectations with $5.77 billion against a forecast of $5.73 billion. Additionally, the company expanded its Unsecured Revolving Credit Facility from $1.5 billion to $2 billion, extending the maturity date to March 2030, which enhances its financial flexibility. Goldman Sachs recently downgraded Genuine Parts from Neutral to Sell, citing underperformance in its NAPA business and concerns about its European Automotive segment and Industrial segment’s exposure to macroeconomic uncertainties. The firm’s price target was reduced to $114, reflecting a cautious outlook on Genuine Parts’ ability to navigate current challenges.
S&P Global Ratings revised Genuine Parts’ credit outlook to negative due to increased leverage from acquisition activities in 2024, with expectations of continued performance challenges in 2025. Despite these challenges, Genuine Parts anticipates restructuring expenses of $150 million to $180 million in 2025, aiming to improve efficiency amid a softer demand environment. The company plans to generate nearly $1.3 billion in operating cash flow and $830 million in free cash flow in 2025. Genuine Parts also projects a diluted EPS range of $6.95 to $7.45 for 2025, with expectations of gradual market improvement in the year’s second half. These developments indicate Genuine Parts’ strategic focus on maintaining financial stability while navigating a challenging market landscape.
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