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Topic: Growth Stocks

Genuine Parts Company $44 – New York symbol GPC

GENUINE PARTS COMPANY $44 (New York symbol GPC; WSSF Rating: Average) distributes over 300,000 automotive replacement parts in the United States, Canada and Mexico, mainly through independent outlets. This business provides about half of its revenue. It also distributes industrial parts, office supplies and electrical equipment.

In the three months ended September 30, 2005, earnings rose 12.5%, to $0.63 a share (total $110.9 million) from $0.56 a share ($97.9 million) a year earlier. Sales grew 10.6%, to $2.6 billion from $2.35 billion, mainly due to strong growth at all its divisions, particularly the industrial and automotive parts businesses.

Earnings could suffer in the fourth quarter of 2005, as the full impact of Hurricane Katrina and higher gas prices could cut demand for auto parts. Rising costs for steel and other raw materials could also put pressure on Genuine Parts’ profit margins.

However, rising interest rates will probably force motorists to delay new car purchases. More older cars on the road should help spur demand for replacement auto parts.

The stock has stayed in a narrow range in the past few months, and now trades at 17.8 times the $2.47 a share it will probably earn in 2005. The $1.25 dividend yields 2.8%.

Genuine Parts is a buy.

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