Genuine Parts Co. (GPC) has announced its results for the second quarter ended June 30, 2022.
“GPC achieved another record quarter, consisting of double-digit sales and earnings increases and a steady cadence of continued growth,” said Paul Donahue, chairman and CEO. “We are benefiting from the resiliency of our Automotive and Industrial businesses and the strategic mix of our operations. We want to thank our 53,000 talented GPC teammates for their exceptional work and commitment to excellence.”
Second Quarter 2022 Results
Sales were $5.6 billion, a 17.1% increase compared to $4.8 billion in the same period of the prior year. The sales growth reflects an 11.5% increase in comparable sales and an 8.8% benefit from acquisitions, partially offset by a 3.2% net unfavorable impact of foreign currency and other.
Net income was $373 million, or $2.62 per diluted earnings per share. This compares to net income of $196 million, or $1.36 per diluted share, in the prior year period.
Adjusted net income, which excludes a net benefit $59 million, or $0.42 per diluted share, in a non-recurring gain on the sale of S.P. Richards real estate partially offset by transaction and other costs related to the acquisition of Kaman Distribution Group (KDG), was $313 million, an increase of 23.9% compared to adjusted net income of $253 million for the same period of the prior year. On a per share diluted basis, adjusted net income was $2.20, an increase of 26.4% compared to $1.74 per diluted share last year. Refer to the reconciliation of GAAP net income to adjusted net income for more information.
Second Quarter 2022 Segment Highlights
Automotive Parts Group
Automotive sales were $3.5 billion, up 8.5% from the same period in 2021, improvement from an 8.4% global increase in comparable sales and a 4.5% contribution from acquisitions, net of a 4.4% unfavorable impact of foreign currency and other. Segment profit of $323 million increased 10.9%, with a segment profit margin of 9.3%, up 20 basis points from the same period of the prior year.
Industrial Parts Group
Industrial sales were $2.1 billion, up 34.5% from the same period in 2021, and reflecting a 17.8% increase in comparable sales and a 17.6% contribution from the acquisition of KDG, slightly offset by a 0.9% unfavorable impact of foreign currency. Segment profit of $225 million increased 49.9%, with profit margin of 10.6%, up 110 basis points from the same period of the prior year.
Will Stengel, president, stated, “Our second quarter results were driven by exceptional execution from our teammates along with the continued focus on our strategic investments, which delivered strong sales and margin expansion in both segments. In addition, we were pleased to further strengthen our balance sheet and generate continued strong cash flow.
“The strength in Automotive was broad-based across our global operations. Likewise, the continued strength in Industrial led to its fifth consecutive quarter of double-digit sales comps,” said Stengel.
Six Months 2022 Results
Sales for the six months ended June 30, 2022, were $10.9 billion, a 17.8% increase from $9.2 billion for the same period in 2021. Net income for the six months was $618 million, or $4.34 per diluted share. The company’s adjusted net income was $579 million, or $4.06 per diluted share, an increase of 25.3% compared to $3.24 per diluted share last year.
Balance Sheet, Cash Flow and Capital Allocation
The company generated operating cash flow from operations of $791 million during the first half of 2022, an increase from $704 million in the same period last year. The increase was driven primarily by higher net income and the effective management of our working capital. GPC used $1.5 billion in cash for investing activities, primarily in connection with the acquisition of KDG, in addition to $153 million for capital expenditures. The company also had $585 million in cash provided by financing activities, which includes $1 billion of net proceeds from debt, primarily related to the KDG acquisition. This was partially offset by quarterly dividends of $243 million paid to shareholders and $123 million of share repurchases. Free cash flow was $638 million for the first half of 2022.
The company ended the quarter with $2 billion in total liquidity, consisting of $1.5 billion availability on the revolving credit facility and $519 million in cash and cash equivalents.
In consideration of several factors, the company is updating full-year 2022 guidance previously provided in its earnings release on April 21, 2022. 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 establishing its updated guidance, which is outlined in the table below. The company says it will continue to update full-year guidance during 2022, as appropriate.
|For the Year Ending December 31, 2022|
|Previous Outlook||Updated Outlook|
|Total sales growth||10% to 12%||12% to 14%|
|Automotive sales growth||5% to 7%||6% to 8%|
|Industrial sales growth||21% to 23%||26% to 28%|
|Diluted earnings per share||$7.56 to $7.71||$8.08 to $8.23|
|Adjusted diluted earnings per share||$7.70 to $7.85||$7.80 to $7.95|
|Effective tax rate||Approximately 25%||Approximately 25%|
|Net cash provided by operating activities||$1.5 billion to $1.7 billion||$1.5 billion to $1.7 billion|
|Free cash flow||$1.2 billion to $1.4 billion||$1.2 billion to $1.4 billion|
“We have had an exceptional first half of 2022, boosted by our Industrial business and success of our acquisition of KDG along with solid Automotive results. Our outlook for the full-year reflects our ongoing confidence in our businesses to execute our strategies despite a dynamic and uncertain external landscape,” Donahue concluded.