Genuine Parts Co. announced its results for the first quarter ended March 31, 2023.
“We are pleased with the continued strength and momentum in our business and excited to report results that exceeded our expectations for the quarter,” said Paul Donahue, chairman and CEO. “Our performance was a clear example of how our multi-year strategic transformation to a global Automotive and Industrial company is a competitive advantage that distinguishes GPC in the marketplace. We benefited from our business mix and the geographic diversity of our operations with continued strong performances in our international automotive businesses and in the industrial segment. We are extremely proud of the outstanding work by all our GPC teammates.”
First Quarter 2023 Results
Sales were $5.8 billion, an 8.9% increase compared to $5.3 billion in the same period of the prior year. The growth in sales is attributable to an 8.7% increase in comparable sales and a 2.4% benefit from acquisitions, partially offset by a 2.2% net unfavorable impact of foreign currency and other.
Net income was $304 million, or a diluted EPS of $2.14. This compares to net income of $246 million, or $1.72 per diluted share in the prior year period.
Net income of $304 million compares to adjusted net income of $266 million for the same three-month period of the prior year, an increase of 14.4%. On a per share diluted basis, net income was $2.14, an increase of 15.1% compared to adjusted diluted earnings per share of $1.86 last year.
First Quarter 2023 Segment Highlights
Automotive Parts Group
Global Automotive sales were $3.5 billion, up 7% from the same period in 2022, consisting of a 6.6% increase in comparable sales and a 3.5% benefit from acquisitions, net of a 3.1% unfavorable impact of foreign currency and other. Segment profit of $264 million was essentially unchanged from 2022, with segment profit margin of 7.5% down 60 basis points from last year.
Industrial Parts Group
Industrial sales were $2.3 billion, up 11.9% from the same period in 2022, and reflecting a 12.1% increase in comparable sales and a 0.6% benefit from acquisitions, slightly offset by a 0.8% unfavorable impact of foreign currency. Segment profit of $262 million increased 39.1%, with profit margin of 11.6% up 230 basis points from the same period of the prior year.
“Global Automotive sales were driven by the strong performance of our businesses outside the U.S., which helped to partially offset a slow start to the year in our U.S. automotive business,” said Will Stengel, president and chief operating officer. “In the Industrial segment, however, our broad-based strength in sales drove our eighth consecutive quarter of double-digit sales comps. The Industrial team is also operating well, posting the eleventh consecutive quarter of margin expansion. Our first quarter performance is a clear reflection of our balanced portfolio and One GPC approach to executing our strategic initiatives and taking care of our customers.”
Balance Sheet, Cash Flow and Capital Allocation
The company generated cash flow from operations of $198 million for the first three months of 2023. We used $45 million in cash for investing activities, including $88 million for capital expenditures and $40 million for M&A, net of $80 million in proceeds from the sale of investments. We also used $158 million in cash for financing activities, including $126 million for quarterly dividends paid to shareholders and $68 million for stock repurchases. Free cash flow was $109 million for the first three months of 2023.
The company ended the quarter with $2.1 billion in total liquidity, consisting of $1.4 billion availability on the revolving credit facility and $651 million in cash and cash equivalents.
The company is updating full-year 2023 guidance previously provided in its earnings release on Feb. 23, 2023, and at its Investor Day on March 23, 2023. The company considered its recent business trends and financial results, current growth plans, strategic initiatives, global economic outlook, geopolitical conflicts and the potential impact on results in updating its guidance, which is outlined in the table below.
|For the Year Ending December 31, 2023|
|Previous Outlook||Updated Outlook|
|Total sales growth||4% to 6%||4% to 6%|
|Automotive sales growth||4% to 6%||4% to 6%|
|Industrial sales growth||4% to 6%||4% to 6%|
|Diluted earnings per share||$8.80 to $8.95||$8.95 to $9.10|
|Adjusted diluted earnings per share||$8.80 to $8.95||$8.95 to $9.10|
|Effective tax rate||Approximately 25%||Approximately 25%|
|Net cash provided by operating activities||$1.2 billion to $1.4 billion||$1.3 billion to $1.4 billion|
|Free cash flow||$800 million to $1.0 billion||$900 million to $1.0 billion|
“We are pleased with the solid start to 2023 and continue to expect another strong year of profitable growth. Our updated outlook for the full year reflects the confidence in our strategic plans and ability to execute through continued economic uncertainty. We believe GPC is well-positioned with the financial strength and flexibility to support our growth plans and provide for disciplined capital allocation and enhanced shareholder value,” Donahue concluded.