Genuine Parts (GPC)

Auto and industrial parts retailer Genuine Parts (NYSE:GPC) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 4.9% year on year to $6.26 billion. Its non-GAAP profit of $1.98 per share was 0.6% below analysts’ consensus estimates.

Company Overview

Largely targeting the professional customer, Genuine Parts (NYSE:GPC) sells auto and industrial parts such as batteries, belts, bearings, and machine fluids.

Cars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.

Competitors offering auto and/or industrial parts include Advance Auto Parts (NYSE:AAP), AutoZone (NYSE:AZO), Grainger (NYSE:GWW), and Fastenal (NASDAQ:FAST).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $24.06 billion in revenue over the past 12 months, Genuine Parts is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there is only so much real estate to build new stores, placing a ceiling on its growth. To expand meaningfully, Genuine Parts likely needs to tweak its prices or enter new markets.

As you can see below, Genuine Parts’s 5.1% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was tepid.

This quarter, Genuine Parts reported modest year-on-year revenue growth of 4.9% but beat Wall Street’s estimates by 2.2%.

Looking ahead, sell-side analysts expect revenue to grow 2.7% over the next 12 months, a slight deceleration versus the last six years. This projection is underwhelming and implies its products will see some demand headwinds.

Number of Stores

A retailer’s store count often determines how much revenue it can generate.

Over the last two years, Genuine Parts opened new stores at a rapid clip by averaging 7% annual growth, among the fastest in the consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Note that Genuine Parts reports its store count intermittently, so some data points are missing in the chart below.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.

Genuine Parts’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat. Genuine Parts should consider improving its foot traffic and efficiency before expanding its store base.

In the latest quarter, Genuine Parts’s same-store sales rose 2.3% year on year. This growth was a well-appreciated turnaround from its historical levels, showing the business is regaining momentum.

Genuine Parts’s unit economics are higher than the typical retailer, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 36.8% gross margin over the last two years. That means for every $100 in revenue, $63.24 went towards paying for inventory, transportation, and distribution.

Genuine Parts produced a 37.4% gross profit margin in Q3, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Genuine Parts’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 6% over the last two years. This profitability was paltry for a consumer retail business and caused by its suboptimal cost structure.

Looking at the trend in its profitability, Genuine Parts’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Genuine Parts generated an operating margin profit margin of 8.6%, up 3.2 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Genuine Parts has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 2.2% over the last two years, slightly better than the broader consumer retail sector.

Taking a step back, we can see that Genuine Parts’s margin dropped by 3.3 percentage points over the last year. This decrease came from the higher costs associated with opening more stores.

Genuine Parts’s free cash flow clocked in at $240 million in Q3, equivalent to a 3.8% margin. The company’s cash profitability regressed as it was 2.2 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Genuine Parts historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 13.9%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

Genuine Parts reported $431.4 million of cash and $6.40 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.12 billion of EBITDA over the last 12 months, we view Genuine Parts’s 2.8× net-debt-to-EBITDA ratio as safe. We also see its $66.48 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We liked that Genuine Parts beat analysts’ revenue expectations this quarter. On the other hand, its EPS missed and its full-year EPS guidance slightly missed after being lowered. Overall, we think this quarter could have been better. The stock remained flat at $131.81 immediately after reporting.

Updated: December 4, 2025 at 9:42 PM EST

Before making an investment decision, investors should account for Genuine Parts’s business fundamentals and valuation in addition to what happened in the latest quarter.

Genuine Parts’s business quality ultimately falls short of our standards. To begin with, its revenue growth was a little slower over the last three years, and analysts don’t see anything changing over the next 12 months. And while its new store openings have increased its brand equity, the downside is its poor same-store sales performance has been a headwind. On top of that, its declining EPS over the last three years makes it a less attractive asset to the public markets.

Genuine Parts’s P/E ratio based on the next 12 months is 15.7x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $146.11 on the company (compared to the current share price of $130.56).