Raymond James upgrades Genuine Parts on breakup value

Investing.com -- Genuine Parts Company was upgraded to Strong Buy from Outperform at Raymond James, which set a $145 price target based on a sum-of-the-parts valuation following the planned separation of its Auto and Industrial businesses. Shares jumped 2% at $119 on Tuesday.

Shares have fallen about 20% since the fourth-quarter earnings report, despite the company announcing it would split its operations. Raymond James said the current setup is “constructively asymmetric,” with the implied valuation of the Auto business well below peers.

The brokerage values the Motion industrial segment at roughly 15 times forward EBITDA, a discount to direct peer Applied Industrial Technologies, which trades near 17 times. It assigns 10 times EBITDA to North America Auto, in line with Advance Auto Parts, and 8 times to International Auto.

Under those assumptions, Raymond James calculates fair value of about $145 per share, including $50 million of stranded costs. It said that if Motion were valued at 15 times, the market would be implying roughly 4.5 times EBITDA for the combined Auto businesses, versus about 15 times for peers such as O'Reilly Automotive and AutoZone.

The firm expects the separation to be completed by the first quarter of 2027, with investor days for both businesses planned in the second half of 2026.

Raymond James said early 2026 data show a possible inflection in industrial demand, citing stronger U.S. manufacturing production and rail traffic trends. Motion’s organic growth typically tracks industrial production and pricing indicators.

Risks include continued weakness in the European auto aftermarket, potential pricing pressure in North America and the possibility that Motion is valued closer to its historical average multiple. Even using a lower multiple near 11.5 times, the brokerage said its analysis implies a share price around $120, still above current levels.

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