Greater Than Its Parts: Genuine Parts (GPC)

Genuine Parts is made up of four discrete businesses distributing everything from car parts to printer paper. The company is best known for its retail NAPA Autoparts chain, which has been in business for 85 years–since the era of the Model T Ford. The stores include 1,000 company-owned outlets and more than 5,000 independently owned and operated stores selling NAPA parts. They are focused on both do-it-yourself home auto mechanics and professionals. Historically, this is the type of business that does well during economic downturns, because consumers often opt to repair vehicles instead of replacing them. The company’s other businesses include a supplier of office products and furniture; an industrial supply company with items such as bearings, pneumatics, and electrical and mechanical power transmission parts; and a distributor of supplies needed for electrical work.

Genuine Parts has strong cash flow that allows the company to acquire smaller stores to rev up its earnings. NAPA accounts for 50% of Genuine Parts’ revenues, the industrial business adds another third, and the rest is split between electrical hardware sales and office supplies. The company has a minimal amount of debt and a stock price that has held strong even through the financial crisis. This, however, results in a stock that cannot be labeled “cheap.” Many see the value in a well-run and in-demand business, and thus its price-earnings ratio is consistently high, indicating it is not a bargain. Genuine Parts also carries a three percent dividend that makes it attractive for long-term investors. The stock was a sleeper for much of its first two decades as a public company, but it has gone into high gear since 2009, more than doubling in price with a few brief stalls. At its current market price, it is not a standout buy, but it has good growth potential and looks like it will keep motoring along. It is a stock worth watching and using to fill up the tank should prices drop into a more reasonable range.

Corporate Responsibility

Genuine Parts is not particularly notable in the social responsibility arena, but it has a solid nondiscrimination policy and a responsibility code of conduct. However, the company does not go a step further, as many companies do these days, and actually report on its environmental or social policies, let alone provide specific data. The company’s subsidiary Motion Industries manufactures parts for the maintenance, replacement, and overhaul of equipment used in the solar, hydroelectric, and wind power industries, and it has committed to reducing energy in its own facilities. For the last decade, the company has had two women on the board of directors, Dr. Mary Bullock and Wendy Needham.
Revenues: $12.82 Billion
EPS:
2013E $4.40
2012E $4.05
2011A $3.59
Projected Annual Growth Rate: 12%
Dividend: 3.20%
52 Week High-Low: $66.50 – $48.18
Risk: Medium
Website: genpt.com