This morning (02/19/20) GPC reported Q4 results. Revenue of $4.65bn was 1% below Consensus, while adj. EPS of $1.35 beat Cons. of $1.30 and our $1.29. Automotive margins declined 57bps y/y, largely due to deleverage in Europe (40bps) despite stabilizing topline. GPC also issued 2020 EPS guidance which was 1% below Cons. at the midpoint. Shares were up 3%.
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With concerns over the Coronavirus spreading, we think US Retailers will likely be viewed as near-term relative safe-haven stocks given limited direct exposure to China. However, should the virus spread into a pandemic, especially in China, we see a greater impact to US retailers from indirect supply chain exposure or US GDP growth.
Looking to 2020 we expect a slight deceleration to comps from 2019, but still see trends as healthy. We also see six potential swing factors that could alter this growth outlook. Given the recent sell-off in the space on weather and credit card data, we think these concerns are increasingly priced into the stocks and view the sector as having an attractive risk/return versus a more cyclical market at all-time highs.
To help gear up for 2020 we analyzed 2019 performance, identified 10 key themes into 2020, analyzed post Q3 earnings reaction, and analyzed the key issue facing each stock under coverage into 2020.
This morning GPC reported Q3 results. Revenue growth of +6.2% was 30bps below Consensus. Adj. EPS of $1.50 beat Cons of $1.47 and our $1.46. Automotive margins declined 60bps y/y, largely due to deleverage in Europe on a MSD comp sales decline. GPC also lowered guidance for sales & EPS largely due to EIS divestiture. Shares were up 1%.
Today (10/07/19) we are assuming broader coverage of hardlines and internet retail with deep-dive reports on four companies, including a LOW downgrade to PP. We also have two ratings changes from our existing retail coverage (AAP to UP and ORLY to OP), and assuming coverage of six additional retail names with concise 1-page investment tear sheets.
China cash crunch?
A number of investors have recently asked us about our 2020 expectations for China and at this point we don’t have a high conviction answer. We note several interesting developments within.
What’s the biggest risk for US OEMs?
We’ve been asked what could potentially set back our relatively bullish thesis on the U.S. OEMs (and GM in particular). In our minds the biggest risk is increasing capacity in the pickup truck market. The large pickup truck market still looks ok but we see risk to mid-size trucks.
McDonald’s – DoorDash partnership highlights competitive risks but we still see strong US growth for Uber Eats
We analyze what McDonald’s announced partnership with DoorDash means for Uber, and why we still see strong growth potential for Eats in the US.
GPC – Another EU blow up
Genuine Parts Company reported yesterday AM and missed on both Revenue (by 140bps) and EPS (by 4%), Europe was largely responsible.
This morning (7/18/19) GPC reported Q2 results. Revenue growth of +2.3% was 140bps below Cons. Adj-EPS of $1.57 missed Cons. of $1.64 and our $1.62. Automotive margins declined 70bps y/y, largely due to 250bps of deleverage in Europe on a 7-8% comp sales decline. Shares were down 5%.
We wanted to flag a few highlights in today's (06/05/19) Wolfe Research Auto Daily....
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