Why Genuine Parts Shares Are Sliding Today

Genuine Parts Co GPC reported second-quarter FY23 sales growth of 5.6% year-on-year to $5.92 billion, missing the consensus of $5.96 billion.

The company attributed the sales growth to a 4.9% increase in comparable sales and a 1.8% benefit from acquisitions.

Automotive Parts Group sales grew 5.4% Y/Y. This segment's profit margin contracted 30 bps to 9%.

Industrial sales rose 5.9%, and the segment's profit margin expanded 190 bps to 12.5%.

Adjusted EPS of $2.44 (+10.9% Y/Y) beat the consensus of $2.34.

Gross profit increased 8.9% Y/Y to $2.13 billion, margin expanded by 109 bps to 36.1%.

GPC generated an operating cash flow of $457 million for the first six months of 2023 compared to $790.98 million a year ago. Free cash flow was $252 million.

"Global Automotive sales continue to benefit from our global diversification, as our businesses outside the U.S. posted mid-single-digit to double-digit growth in local currency in the second quarter. Our Industrial sales growth was broad-based, with all product categories and major industries served growing from the prior year, allowing the Industrial team to post its twelfth consecutive quarter of margin expansion," commented Will Stengel, President and COO.

Genuine Parts ended the quarter with $2 billion in total liquidity, consisting of $530 million in cash and equivalents. 

FY23 Outlook: Genuine Parts continues to see revenue growth of 4% - 6%. It raised its EPS outlook to $9.15-$9.30 from $8.95-$9.10 versus the consensus of $9.08.

The company expects a free cash flow of $900 million - $1.0 billion.

Price Action: GPC shares are trading lower by 6.46% at $157.21 on the last check Thursday.