We undertook the unenviable task of reading the proxy for every company under coverage (and one we don’t cover: TSLA).
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Yesterday (5/9/2018), Sears (not covered) announced a partnership with Amazon (c/b S. Mushkin) to sell and install any brand of tire at Sears’ 400+ Auto Center locations. In Feb. 2018, Amazon began carrying Die Hard starters, chargers, and Gold AGM batteries (expensive). Stock reaction was mixed with the group only modestly trailing (+0.5%) the S&P 500 (+1.0%).
Yesterday AM (4/20/2018), GPC reported Q1 2018 earnings. Total revenue growth of +17.4% was 300bps above Consensus. Adj. EPS of $1.27 missed both Consensus of $1.32 and our $1.29. Full-year 2018 guidance remained unchanged despite the miss, potentially partially offset by a now lower tax rate guide of 26% (vs. 26-27% previously). GPC shares were down -3.5% versus the S&P 500 of -0.6%.
This AM (4/12/2018) pre-open, GPC announced that it is tax-free spinning its Office segment to its closest peer ESND (Not covered) with expected cash proceeds of $347M and an expected pro-rata share value of ESND of $333M, which essentially assumes ESND’s pre-deal share value holds after the deal. GPC shares are +1% today (in-line with S&P 500).
This morning (02/21/18), GPC reported Q4 17 earnings. Total revenue growth of +11.3% was 90bps above Consensus. Adj. EPS of $1.19 beat both Consensus $1.02 and our $0.97. Full-year 2018 guidance, however, disappointed with a mid-point of $5.68 versus Consensus of $5.86 and our $5.75, as taxes came in slightly higher and GPC called out -$0.15 to -$0.20 of incremental investment in 2018. Additionally, given tax reform and AAG accretion, the mid-point of guidance would reflect negative core EPS growth. GPC shares were down -5% on the day.
Most of you cover 50 – 200 stocks and therefore don’t have the liberty of being as into the weeds on every name – that’s our job. To help you do yours, we have created a comprehensive, but chart-heavy, guide to our coverage that is meant to have shelf life and that can be referred back to when you are ready to dig more into our coverage.
Auto part retailers were down -30 to -42% through August but are up +17 to 47% since. To gauge current analyst expectations, we surveyed buy side investors to sort out top ideas, relative positioning, and near-term expectations for comps. We also tackled contentious topics including weather, the impact of the 09-11 SAAR air pocket, AAP margin trajectory, tax reform, and valuation methodology.
In our first tax reform note we studied numerous angles on tax reform. As a continuation, we are studying additional angles and also adjusting numbers and price targets (Exhibit 1). While we remain concerned of the long-term risk/reward of tax reform, near-term we expect consensus EPS revisions to occur as the rewards are easier to forecast than the risks.
After years of inflating asset prices via credit let’s unwind QE, raise interest rates, meddle in regional wars, reduce homeownership incentives, rush a radical tax overhaul including reducing corporate taxes, rebalance personal taxes, and expanding the fiscal deficit, all during a period of trough unemployment. Let’s just throw all of the economic models out, nothing can go wrong here, I’m psyched let’s go shoot some birds
CEO changes are often viewed as an investment catalyst for strategic change or as a risk to the status quo. We went back and tracked 85 CEO changes across Consumer Retail and Automotive companies looking to better understand stock performance before, after, and during these CEO changes. We show our full database in Exhibit 9,10 & 11.
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