Morningstar | Genuine Parts Should Benefit From Strong Market Conditions in the Automotive Part Retail Sector
As a top distributor of automotive and industrial/electrical parts (56% and 34% of 2018 net sales, respectively), Genuine Parts benefits from industry dynamics favoring its scale-enabled service levels. We believe the firm will use its cost advantage to boost sales through its ability to offer a wide variety of parts on short order, building inventory and cost leverage as sales rise while fortifying brand value in a way subscale peers cannot economically replicate.Aftermarket auto-parts retailers serve DIY and professional clients. The faster-growing latter category (about 75%-80% of segment sales) depends on high levels of part availability and rapid delivery to turn repair bays quickly. Both categories have benefited from rising miles driven and average vehicle age, along with low unemployment. Genuine Parts (mostly via its NAPA brand) should benefit due to its infrastructure, which enables it to economically offer a vast catalog with quick delivery. We believe its acquisition of Alliance Automotive should elevate its standing with global vendors.Similar dynamics prevail in its industrial parts group (Motion Industries and EIS). Clients need to receive replacement parts quickly, particularly when failures result in costly downtime. Customers (facilities engineers) depend on the unit's part availability and its trained staff for assistance in locating the needed component, guidance on an oft-unfamiliar installation procedure, and rapid delivery. Spreading infrastructure and inventory investments over a large sales base leads to a cost advantage over small peers, while service levels reinforce the firm’s brand intangible asset in a way smaller rivals cannot duplicate.Genuine Parts maximizes automotive and industrial inventory turnover by centralizing slow-selling items, as several locations can call upon warehoused parts as demand warrants. We believe resulting virtually on-demand availability cannot be matched by subscale peers, enabling Genuine Parts to act as a consolidator.Genuine Parts is engaged in the distribution of automotive replacement parts, industrial parts, and business products. The company's reportable business segments are: Automotive, which distributes automotive parts and accessory items and provides inventory, cataloging, marketing, training and other programs to the automotive aftermarket; Industrial, which distributes industrial replacement parts and related supplies such as bearings, mechanical and electrical power transmission products, industrial automation, and hose, among others; and Business Products, which is engaged in the wholesale distribution of a line of office and other business-related products through a customer base of resellers.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.