GENUINE PARTS CO. $43 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) distributes over 320,000 automotive replacement parts through 1,200 company-owned stores and 4,800 independent dealers.

It also distributes industrial parts, electronic equipment and office supplies. The automotive business supplies roughly half of its revenue and profit.

Demand for replacement parts tends to be less cyclical than car sales, since it’s cheaper to repair an older vehicle than buy a new one. That helped the company’s revenue grow at a compound annual rate of 4.6%, from $8.2 billion in 2001 to $9.8 billion in 2005. Earnings before unusual items rose from $2.08 a share in 2001 (total $361.5 million) to $2.50 a share ($437.4 million) in 2005, or 4.7% compounded annually.

In the three months ended June 30, 2006, Genuine Parts earned $0.70 a share (total $120.7 million), up 11.1% from $0.63 a share ($111.0 million) a year earlier. Revenue rose 8.0%, to $2.7 billion from $2.5 billion, mainly due to strong gains at the industrial and electrical divisions.

Genuine Parts is now focusing on improving profits, particularly in its core auto parts business. The company recently closed several money-losing distribution centers that serve large fleets and new car dealers. It also aims to boost sales with a new business unit that will focus on the heavy truck and trailer industry.

The company spent $83.5 million on stock repurchases in the first half of 2006. It now plans to buy back a further 15 million of its shares, or roughly 9% of the total outstanding.

Genuine Parts has increased its annual dividend for the past 49 consecutive years. The current rate of $1.35 yields 3.1%.

The stock has moved down lately, and now trades at 15.6 times the $2.75 a share it will probably earn in 2006. However, it will likely make little progress until profit margins improve.

Genuine Parts is a hold.