Genuine Parts Company (GPC) reported an 18% drop in profits to $108 million in the third quarter from $131 million in the prior-year quarter. On an earnings per share [EPS] basis, profit of 67 cents was above the Zacks Consensus Estimate of 65 cents. Nevertheless, it was lower than the year-ago EPS of 81 cents. Sales for the quarter fell 10% to $2.61 billion.

Genuine Parts’ Automotive and Office Products segments witnessed improvements during the quarter. However, Industrial Parts and Electrical/Electronic Material segments have not yet recovered. Revenue in the Automotive Parts segment fell 1% to $1.38 billion, Industrial Parts segment slashed 22% to $711 million, Office Products segment declined 5% to $436 million and Electrical Group tumbled 30% to $89 million.

Financial Position

Genuine Parts has strengthened its financial position through working capital and asset management initiatives as well as cost reduction efforts. The company had cash and cash equivalents of $363 million as on Sept. 30, 2009 . Long-term debt amounted to $500 million as on that date. The long-term debt-to-capitalization ratio was as low as 16%.

In the first nine months of 2009, Genuine Parts’ net cash flow from operating activities increased to $766.5 million from $469 million in the prior-year period. Meanwhile, capital expenditures reduced to $49 million from $60 million a year ago.

We continue to recommend the shares of Genuine Parts as Neutral with a target price of $37.

Zacks Investment Research
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