In a tight lending environment, older cars are staying on the road for longer. As a result, one way to play the auto sector is through auto parts manufacturers. Many investors who have taken this approach are being rewarded today with a double-digit increase in shares of Genuine Parts Company (NYSE: GPC). With a gain of nearly 12% on strong conviction, this dividend-paying stock is putting many portfolios in the green today after solid earnings and an improved full-year outlook.
With a dividend yield of 2.75%, Genuine Parts investors get to have their cake and eat it too on this stock after a strong quarterly earnings report unleashed the bulls. As a member of the Dividend Aristocrats, Atlanta-based Genuine Parts has increased its distribution for nearly seven straight decades, offering investors a dependable source of passive income while also delivering capital appreciation.
Genuine Parts is benefiting from several tailwinds of late, not least an economy in which people are investing in auto repairs instead of buying new vehicles, as a result of which auto parts remain in strong demand. While overall sales inched higher modestly, the company reaffirmed its revenue growth forecast and improved its earnings forecast for 2024.
Glass Half Full
Genuine Parts reported Q1 sales of $5.8 billion, representing a slight year-over-year increase of 0.3%. The company pointed out that it was up against a challenging quarterly comparison. Net income of $249 million, or $1.78 per share, fell below year-ago results of $304 million or $2.14 per share. But investors chose to see the glass half full, owing to an improved outlook by the management team.
Genuine Parts updated its full-year 2024 guidance from an outlook delivered in February, reaffirming its expectations for total sales growth of 3%-5% while raising its diluted EPS projections to a range of $9.05-$9.20 from $8.95-$9.15. The outlook was underscored by positive sentiment in which the company continues to experience robust renewal rates with corporate customers, representing almost half of the business.
Genuine Parts became publicly traded back in 1948 and has been paying investors dividends ever since. Earlier this year, Genuine Parts’ board of directors approved a 5% hike in the quarterly distribution to $1 per share, bringing the annual distribution to $4 compared with $3.80 in 2023.
Is Genuine Parts a Buy in 2024?
Truist Financial believes Genuine Parts is just revving up, maintaining a buy rating on the stock and raising the price target to $183, reflecting 14.5% upside potential. Between an auto sector that’s set to stabilize throughout the year and an improved outlook by the company, Genuine Parts stock could be trading at its 52-week high of nearly $175 again sooner than later.
The stock is popular among hedge fund traders including DE Shaw, which as of Q4 2023 was the biggest shareholder. During Q1, Macquarie’s Delaware Value Fund swapped shares of RTX Corp for a position in Genuine Parts.
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