On Thursday, CFRA, a notable investment research firm, upgraded its price target for Genuine Parts Company (NYSE:GPC) shares to $180 from the previous $160 while maintaining a Buy rating. The analyst cited an improved earnings outlook and consistent performance as the basis for the target increase.
Genuine Parts Company, known for its distribution of automotive replacement parts, industrial parts, and materials, has seen its price target raised by CFRA based on a 2025 price-to-earnings (P/E) ratio of 16.7 times. This valuation represents a discount to the company's 10-year average forward P/E of 18.7 times.
CFRA also adjusted its earnings per share (EPS) estimates upwards, setting the 2024 forecast at $9.90, up from $9.85, and the 2025 projection at $10.80, increased from $10.70.
The company recently reported a first-quarter adjusted EPS of $2.22, surpassing both the previous year's $2.14 and the consensus estimate of $2.17. The positive results were attributed to stronger-than-expected profit margins despite revenues that were slightly below consensus at $5.78 billion.
Comparable sales showed a modest decline, with a 0.9% decrease overall, but the automotive segment reported a slight increase. Meanwhile, acquisitions contributed a 1.9% boost to the company's performance.
Moreover, Genuine Parts Company's gross margin expanded by 100 basis points to 35.9%, exceeding consensus expectations by 40 basis points. In light of these results, the company has revised its full-year 2024 adjusted EPS guidance to a range of $9.80 to $9.95, compared to the previous range of $9.70 to $9.90 and above the current consensus of $9.78.
CFRA has expressed confidence in Genuine Parts Company's track record, highlighting 16 consecutive quarters of bottom-line outperformance. The firm also commended the company's ongoing share repurchase program and its status as an S&P Dividend Aristocrat—a testament to its long history of dividend growth.
With an anticipated free cash flow of $0.8 billion to $1.0 billion for the year, Genuine Parts is expected to continue its tradition of returning cash to shareholders.
InvestingPro Insights
The recent upgrade by CFRA on Genuine Parts Company's price target is further complemented by real-time data and insights from InvestingPro. With a market capitalization of $22.49 billion, Genuine Parts Company stands as a substantial player in the Distributors industry.
The company's commitment to shareholder returns is underscored by its impressive track record of raising its dividend for 36 consecutive years, a trend that InvestingPro Tips suggests is likely to continue. Moreover, the company's ability to maintain dividend payments for over half a century speaks volumes about its financial stability and prudent capital management strategies.
InvestingPro data reveals a P/E ratio of 16.99, which is slightly above the adjusted P/E ratio for the last twelve months as of Q4 2023, at 15.26. This indicates that the company is trading at a high P/E ratio relative to near-term earnings growth, a point of consideration for investors seeking value. However, the company's stock is known to trade with low price volatility, providing a degree of stability in an investor's portfolio.
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