Genuine Parts Co. $50 - New York symbol GPC

GENUINE PARTS CO. $50 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.5 million; Market cap: $8.5 billion; WSSF Rating: Average) makes and distributes automotive replacement parts to over 4,800 independent outlets in North America. The company also owns 1,100 stores that operate under the NAPA banner. It also distributes industrial parts, electrical supplies and office equipment. The company earned $2.76 a share in 2006, up 10.4% from $2.50 a share in 2005. Revenue rose 7.1%, to $10.5 billion from $9.8 billion. Auto parts account for roughly half of Genuine Parts’ sales. Higher gas prices forced car owners to drive less in 2006, which hurt demand for parts. Consequently, sales at this division rose just 3% in 2006, compared to a 6% increase in 2005. But sales should hold up if the economy slows, since the company’s high-quality auto parts extend the life of most cars. A cost cutting plan should lift profits in 2007. Genuine Parts will probably get most of its growth in the next year or two from its industrial and electrical parts operations. North American plant operators continue to upgrade their facilities with automated production equipment, which helps improve their productivity. That should spur steady demand for items such as hoses, belts, bearings, pumps, valves, and wires. The company recently cut the threshold of stockholder approval that it needs to complete a takeover, from two-thirds to a simple majority. That should make it easier for an offer to succeed, and helped push the stock to a new peak of $51. Genuine Parts now trades at 16.4 times the $3.05 a share that it should earn this year. The $1.46 dividend yields 2.9%. Genuine Parts is a buy.