Standard Motor Beats Estimates - Analyst Blog

Standard Motor Products Inc. (SMP) witnessed a rise in profit to $$8.7 million or 38 cents per share in the second quarter of the year from $5.2 million or 27 cents per share in the same quarter of 2009. The profit was higher than the Zacks Consensus Estimate of 24 cents per share.

Consolidated revenues in the quarter rose 17% to $231 million, driven mainly by strong performance in the Engine Management segment. Operating profit almost doubled to $15.3 million compared with $8.4 million a year ago.

Revenues in the Engine Management segment escalated 24% to $152.8 million. The sales gain was attributable to strong growth in the aftermarket, new business from the acquisition of Federal-Mogul Corp.'s (FDML) wire line, and an increase in original equipment (OE) volume.

Operating profit in the segment increased to $11.2 million from $9 million in the second quarter of 2009. However, operating margin remained flat at 7.3% compared with the year-ago quarter.

Revenues in the Temperature Control segment went up 13% to $73.9 million. Operating profit more than doubled to $7.7 million from $3 million in the year-ago quarter. Consequently, the operating margin improved to 10.4% from 4.6% a year ago.

Standard Motor’s cash balance rose to $14.7 million as of June 30, 2010 from $10.6 million as of December 31, 2009. Long-term debt was almost flat at $17.7 million compared with the period ended December 31, 2009. The long-term debt-to-capitalization ratio remained stable at 8% as of June 30, 2010 compared with the period ended December 31, 2009.

Standard Motor Products, based in Long Island City, New York, is engaged in manufacturing and distributing replacement parts for motor vehicles. The major competitive advantages of the company are a trained sales force, extensive product range, sophisticated parts cataloging systems and an effective inventory management.

However, its customer base is concentrated, with the top five customers accounting for more than 50% of sales. Therefore, we continue to maintain our short term recommendation on the stock as Zacks#3 Rank (Hold) and long-term recommendation of “Neutral”.

 
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