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Despite a top- and bottom-line beat in the second quarter, shares of Genuine Parts (NYSE:GPC) are under pressure in premarket trading after the company cut its previous guidance to reflect the “evolving external environment” and the impact of U.S. tariffs on the company’s business operations.
“The evolving tariff landscape brings with it a degree of uncertainty, and as a result, we expect to see a more moderated improvement in market conditions than we projected in February,” said CFO Bert Nappier.
GPC now expects sales growth of 1% to 3% versus 2% to 4%, previously with Automotive sales expected to increase by 1.5% to 3.5% (versus 2% to 4% prior) and Industrial sales growth of 1% to 3% (versus 2% to 4% prior).
Adjusted earnings are now forecasted to be between $7.50 to $8 per share from $7.75 to $8.25 per share in its prior guidance and versus $7.73 estimates.
Free cash flow is expected to be between $700M to $900M from $800M to $1B, previously.
As a major supplier to General Motors’ (GM) Buick, GMC, and Cadillac models, Genuine Parts (NYSE:GPC) was similarly vulnerable to the broader automotive landscape as its customers. As a result, the company’s Q2 adjusted profit of $2.10 per share was down 14% from a year ago, but was 4 cents better than expected. Thanks to acquisitions and the favorable impact of foreign exchange rates, sales improved 3.3% to $6.2B, beating expectations by $90M. Comparable sales at its retail locations, including NAPA Auto Parts, improved by a modest 0.2%.
By segment, sales in the company’s Automotive Parts Group increased 5%, while sales in its Industrial Parts Group improved by just 0.7% year-over-year. Comparable sales in Industrial Parts Group were down 0.1%, while Automotive comp sales increased 0.4%.
“Our results for the quarter were in line with our expectations and reflect the execution of our strategic initiatives and cost restructuring actions against continued challenging market conditions,” said CEO Will Stengel.
Related tickers: AutoZone (AZO), Advance Auto Parts (AAP), O’Reilly Automotive (ORLY)