Wedbush Upgrades Genuine Parts (GPC) to Outperform

Wedbush upgraded Genuine Parts (NYSE: GPC) from Neutral to Outperform with a price target of $108.00 saying the risk/reward is more favorable with downside protection.

Analyst Seth Basham commented, "We hosted meetings with GPC CEO Tom Gallagher and President Paul Donahue over the last two weeks and came away increasingly positive on the outlook for the company. GPC shares have declined 15.5% YTD vs. a 2.7% increase in the S&P 500 due primarily to sales growth concerns, in our view. Headwinds remain from FX and Industrial end-market slowdowns, but we think they are well understood and accounted for in consensus expectations. Moreover, solid execution, improving economic growth from 1Q, stabilizing/rising oil prices and normalizing weather trends bode well for the company's ability to meet or beat 2015 guidance to rebuild confidence in this story as earnings growth reaccelerates."

The analyst sees downside protection from strategic and capital allocation options. "We also examine capital allocation options and find potential for value creation in adding leverage for share repurchases and larger-scale M&A in the company's fragmented but consolidating Industrial and Auto parts distribution businesses. Further, we perform a break-up analysis that indicates the sum of the company's divisions is at least as valuable as the combined company, providing downside support, in our view. While these are low-probability scenarios and should not take anything away from Mr. Gallagher's strong and disciplined capital allocation track record, the company has characteristics that warrant further consideration of the options. All told, more favorable risk/reward leads us to upgrade GPC shares from NEUTRAL to OUTPERFORM."

For an analyst ratings summary and ratings history on Genuine Parts click here. For more ratings news on Genuine Parts click here.

Shares of Genuine Parts closed at $90.75 yesterday.

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