Genuine Parts Co. (GPC), a leading provider of automotive and industrial replacement parts, experienced a significant stock decline on Tuesday after releasing mixed third-quarter earnings and a gloomy outlook. The company’s adjusted EPS of $1.88 fell short of analyst expectations of $2.42, sending a clear signal of financial struggles.
While the company reported a 2.5% year-over-year increase in sales, reaching $5.97 billion, this figure only slightly surpassed analyst estimates of $5.94 billion. The growth was attributed to a 3.2% boost from acquisitions, which was partially offset by a 0.8% decrease in comparable sales.
Despite the sales growth, Genuine Parts faced challenges in maintaining profitability. The Automotive Parts Group saw a 4.8% year-over-year increase in sales, but its profit margin contracted by 200 basis points to 6.9%. Similarly, the Industrial Parts Group experienced a 1.2% decline in sales, with its profit margin contracting by 100 basis points to 11.9%.
The company’s CEO, Will Stengel, attributed the disappointing results to ongoing weakness in market conditions within Europe and its Industrial business.
Looking ahead, Genuine Parts lowered its revenue growth outlook for fiscal 2024, now expecting a 1%-2% increase or $23.32 billion-$23.55 billion in revenue, compared to its prior forecast of 1%-3% or $23.32 billion-$23.78 billion. The company also reduced its adjusted EPS outlook to $8.00-$8.20, down from the previous forecast of $9.30-$9.50.
Despite the gloomy outlook, Genuine Parts remains optimistic about its future cash flow, anticipating free cash flow of $800 million-$1.0 billion and operating cash flow of $1.3 billion-$1.5 billion for fiscal 2024.
The news of Genuine Parts’ disappointing performance and downgraded outlook sent shockwaves through the market. The company’s stock plummeted by 18.50% to $116.69 in early trading on Tuesday. Investors are clearly concerned about the company’s ability to navigate the challenging economic environment and deliver on its previously ambitious targets. This decline highlights the significant challenges facing the automotive and industrial parts industry, with global economic uncertainties and supply chain disruptions continuing to weigh on businesses.