Auto parts leaders— 1 buy, 1 hold

Article Excerpt

Genuine Parts and Snap-On (see box) face two challenges: cyclical demand for their automotive products, and a high U.S. dollar, which is hurting the contribution of their foreign businesses. They are using the current slowdown to make small acquisitions that will open new product lines. Their cost-control plans are also freeing up more cash for dividends. GENUINE PARTS CO. $91 (New York symbol GPC; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 150.8 million; Market cap: $13.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.9%; TSINetwork Rating: Average; www.genpt.com) gets 52% of its sales and 57% of its earnings by selling replacement auto parts: Genuine operates 1,100 outlets under the NAPA banner, and its distribution business serves 4,900 independent stores in North America, Australia and New Zealand. The company also sells industrial parts (30% of sales, 27% of earnings), office products (13%, 11%) and electrical equipment (5%, 5%). In 2015, Genuine’s overall sales fell 0.4%, to $15.28 billion…