Genuine Parts Company (GPC) revealed a 20% rise in profit to $118.6 million in the fourth quarter of 2010 from $99.2 million in the same quarter of last year. On earnings per share basis, the profit increased 21% from 62 cents to 75 cents, beating the Zacks Consensus Estimate by 5 cents per share.

Sales in the quarter grew 14% to $2.81 billion, surpassing the Zacks Consensus Estimate of $2.73 billion, driven by improvements in all its businesses. Sales in the Automotive Parts segment rose 9% to $1.38 billion, Industrial Parts segment escalated 24% to $915.2 million, Office Products Group inched up 3% to $395.0 million and Electrical segment surged 40% to $125.6 million.

For full year 2010, Genuine Parts reported a 19% increase in profit to $475.5 million from $399.6 million in 2009. Earnings per share were $3.00, up 20% from $2.50 in 2009. It was higher than the Zacks Consensus Estimate of $2.95 per share. Sales in the year appreciated 11% to $11.21 billion, up from the the Zacks Consensus Estimate of $11.13 billion.

Genuine Parts had cash and cash equivalents of $530.0 million as of December 31, 2010, an increase from $336.8 million in the year-ago period. Long-term debt remained unchanged at $500 million as of that date. Consequently, the company’s long-term debt-to-capitalization ratio remained unchanged at 15% as of the above date compared with the corresponding period of last year.

In 2010, Genuine Parts’ net cash flow from operations declined to $678.7 million from $845.3 million in the prior-year, despite an improvement in profit. This was primarily attributable to a significant decline in excess tax benefits from share-based compensation. Meanwhile, capital expenditures increased to $85.4 million from $69.4 million in 2009.

Genuine Parts has undertaken various initiatives to boost sales and earnings, such as product line expansion, penetration into new markets and cost-saving activities. The company relies on a diverse product portfolio for top-line and bottom-line growth.

Further, the company has a strong financial position with a lower debt and a higher cash balance. These factors have led the company to retain a Zacks #2 Rank on its stock, which translates to a recommendation of “Buy” for the short term (1–3 months).

 
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