(281)-719-8904 KenFaulkenberry@AAAMP.com

Genuine Parts (GPC) Stock Analysis

by

Genuine Parts Dividend

(updated 8/18/2017)

Genuine Parts (GPC) has paid a dividend since 1948 and increased its dividend for 60 consecutive years; qualifying the company as a Dividend King, Dividend Aristocrat and Dividend Champion.

Price: $81.63
Current Dividend: $2.70

Dividend Yield: 3.3%
Cash Dividend Payout Ratio: 66%

Market Capitalization: 12.0 B
Enterprise Value: 12.9 B

Genuine Parts (GPC) Logo

Description

Sector: Consumer Cyclical
Industry: Specialty Retail

Genuine Parts (GPC) has a distribution network of over 2650 operations far and near, including the United States, Canada, Mexico, the Caribbean, Australia, New Zealand, China, and global emerging markets. The company describes itself as “a service organization” divided into 4 groups:

Automotive Replacement Parts: NAPA Auto Part
(52% of GPC revenues. 6,000+ stores that distribute approximately 450,000 automotive replacement parts, accessory and service items.)

Industrial Replacement Parts: Motion Industries
(30% of GPC revenues, over 6.5 million parts and related supplies including bearings, mechanical power transmission products, industrial and safety supplies, etc.)

Office Products: S.P. Richards
(13% of GPC revenues, over 62,000 items including general office supplies, cleaning and breakroom supplies, disposable food service products, office furniture, school supplies, safety & security items, etc.)

Electrical/Electronic Materials: EIS, Inc:
(5% of GPC revenues, over 100,000 items including wire and cable, insulating and conductive materials, assembly tools, and test equipment.)

Genuine Parts Annual Report

SWOT Analysis

Strengths

Genuine Parts is a trusted brand with a large scale distribution system and convenient retail locations. Their reputation for parts availability and fast delivery sets NAPA apart from smaller competitors.

Superior levels of component availability give a huge advantage to GPC. To replicate what the company has built over the decades would require an investment that keeps competitors away (moat).

Weaknesses

In an environment where revenues have only been growing about 5% annually, GPC has to maintain its competitive advantages to prevent erosion of earnings power.

Opportunities

Genuine Parts continues to expand into new markets. A high average vehicle age, increased driving per car, and other economic trends favor GPC.

Threats

Competition (including independent stores) is always a factor that compels a successful company such as GPC to stay on top of margins, inventory, service, etc. GPC must continue improving and staying a step ahead of the competition.

                    Dividend Analyzer Checklist

                                       (updated June 2017)

Dividend Safety Score (18/33 points)

Dividend Per Share (ttm): $2.65
Dividend Payout Ratio (ttm): 57%
Dividend Per Share (10 Year Growth): 7.0%
Cash From Operations (CFO) Per Share (ttm): $6.11
CFO Dividend Coverage (CFO / DPS): 2.3 (2/6 points)
Free Cash Flow (FCF) Per Share (ttm): $4.95
FCF Dividend Coverage (FCF / DPS): 1.9(4/6 points)
Net Financial Debt: $947 M
Total Assets: $9167 M
Net Financial Debt / Total Assets: 10% (9/12 points)
Net Financial Debt to EBITDA (ttm): 75%
Total Liabilities to Assets Ratio (Qtr.): 65%
Piotroski Score (1-9) (TTM): (3/9 points)

Profitability & Growth Score (23/33 points)

Revenue (10 Year Growth) *CAGR > 4.14%: 3.9% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 5.2% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 8.1% (6/6 points)
Operating Earnings Yield (ttm): 7.7% (3/7 points)
Net Income (ttm): $689 M
Gross Profit (ttm): $4651 m
Total Assets: $9167 M
Gross Profitability Ratio = GP / Total Assets: 51% (10/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 18%
Return on Invested Capital (ROIC): 17%
Return on Invested Capital (ROIC) (5 Year Median): 18%
Return on Invested Capital (ROIC) (10 Year Median): 17%

Valuation Score (20/34 points)

Free Cash Flow Yield (ttm): 5.3% (6/9 points)
EV to EBIT (ttm): 13.3 (5/9 points)
EV to EBITDA (ttm): 11.7 (5/9 points)
PE10: 24.5 (4/7 points)
Price to Sales Ratio (ttm): 0.9
Price to Book Value (ttm): 4.2
Price to Earnings Ratio (P/E) (ttm): 19.7

         TOTAL POINTS – (61/100) (50 is an average score)

*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.

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Conclusion

(updated June 2017)

General Parts (GPC) is ranked #43 (out of 252) overall and #17 (out of 31) in the Consumer Cyclical Sector by the Dividend Analyzer.

 

Type of Investor / Recommendation

Large Diversified Dividend Portfolios / Good Option
Looking for Exposure to Kings & Aristocrats / Good Option
Looking For Exposure to Consumer Cyclical Sector / Can Be Considered
Deep Value Investors / Avoid

Portfolio Position Disclosures:
DVB Foundation Portfolio: None
DVB Dividend Growth: None
DVB High Income: None
Arbor Asset Allocation Model Portfolio (AAAMP): None

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Disclaimer: While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.
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