Group 1 - The article reinstates coverage of Genuine Parts (NYSE: GPC) following the release of Q2 results [1] - The company was upgraded to a Strong Buy recommendation based on four key factors: an aging vehicle fleet, rising automotive complexity, and valuation [1] - The analysis is aimed at buy-side hedge professionals conducting fundamental, income-oriented, long-term analysis across sectors globally in developed markets [1]

Core Insights - Genuine Parts reported Q2 2025 GAAP revenue of $6.16 billion, slightly exceeding consensus estimates of $6.12 billion, while adjusted diluted EPS was $2.10, surpassing expectations of $2.07 [1][2] - Despite headline growth, profit and cash flow metrics declined sharply year-over-year, prompting management to lower full-year revenue growth and earnings guidance due to weaker organic sales and margin compression [1][12] Financial Performance - Adjusted diluted EPS decreased by 13.9% year-over-year from $2.44 in Q2 2024 to $2.10 in Q2 2025 [2] - Revenue increased by 3.4% year-over-year, from $5.96 billion in Q2 2024 to $6.16 billion in Q2 2025 [2] - Automotive segment revenue rose by 5.0% year-over-year, while industrial segment revenue increased by only 0.4% [2][6] Operational Developments - Organic comparable sales were nearly flat at 0.2%, indicating that most revenue growth was driven by acquisitions [5] - Free cash flow for the first half of 2025 was negative $80 million, a significant decline from positive $353 million in the same period of 2024 [7][8] - The company recorded after-tax restructuring charges of $37 million as part of a multi-year program aimed at achieving $200 million in annualized cost savings by 2026 [9] Business Overview - Genuine Parts operates through two main segments: automotive (63% of total sales) and industrial (37% of total sales) [3] - The company focuses on maintaining high inventory availability, rapid delivery, and product breadth, with recent efforts directed towards expanding company-owned stores and strategic acquisitions [4] Future Outlook - Management revised 2025 financial guidance lower, now forecasting full-year revenue growth of 1% to 3% and adjusted diluted EPS of $7.50 to $8.00 [12] - Investors should monitor improvements in organic sales growth and the impact of U.S. trade policies, including tariffs affecting 14% of global product sourcing [13]

Core Insights - Genuine Parts Company (GPC) reported mixed Q2 2025 financials, with total sales of $6.2 billion, reflecting a 3.4% growth year-over-year, but faced margin pressures leading to a downward revision of full-year earnings and cash flow outlooks [6][13][39] - The company revised its diluted EPS guidance for FY2025 to a range of $6.55 to $7.05, down from $6.95 to $7.45, primarily due to tariff impacts and persistent cost inflation [5][47] - Management indicated that inflation in Selling, General and Administrative (SG&A) expenses outpaced sales inflation by approximately 100 basis points, contributing to a decline in adjusted EBITDA margin to 8.9% [5][44] Financial Performance - Adjusted EPS for Q2 2025 was $2.10, down 14% year-over-year, impacted by lower pension income and higher depreciation and interest expenses [7][38] - Total adjusted SG&A as a percentage of sales increased to 28.7%, up 150 basis points year-over-year, with absolute SG&A rising by $145 million [7][40] - Operating cash flow is projected at $1.1 billion to $1.3 billion for FY2025, with free cash flow expected at $700 million to $900 million, both lower than previous forecasts [5][57] Segment Performance - Automotive segment sales increased by 5% in Q2 2025, with comparable sales up about 0.5%, while the industrial segment saw sales of $1.8 billion, up about 1% [7][24] - E-commerce accounted for 40% of Motion segment sales, reflecting a growth of over 10% since early 2024 [7][23] - The company acquired 32 U.S. stores in Q2 2025, in addition to 44 in Q1 2025, enhancing its market presence [7][31] Market Conditions - Management noted that the cumulative effect of broad-based tariffs on demand remains a risk, with potential negative consequences if tariffs expand or inflation impacts accelerate [5][55] - The company expects full-year sales growth of 1%-3% for FY2025, with automotive segment sales growth guided at 1.5%-3.5% and industrial segment sales seen up 1%-3% [7][57] - Current PMI readings indicate a contractionary environment, which has influenced the revised growth expectations for both automotive and industrial businesses [49][57] Strategic Initiatives - Ongoing global restructuring initiatives aim to offset rising SG&A expenses and address challenges across diverse geographic markets [6][44] - The company is focused on controlling costs and enhancing operational efficiency, with a target of over $200 million in annualized cost savings by 2026 from restructuring efforts [7][56] - Management emphasized the importance of maintaining customer relationships and adapting to market changes through strategic pricing and sourcing initiatives [6][20]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, equity, and cash flows, along with detailed notes explaining accounting policies, segment performance, debt, and other financial commitments for the periods ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows the company's financial position as of June 30, 2025, compared to December 31, 2024, highlighting increases in total assets, current liabilities, and total equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $20,431,067 | $19,282,705 | $1,148,362 | 5.96% | | Total current assets | $10,473,750 | $9,852,584 | $621,166 | 6.30% | | Goodwill | $3,094,594 | $2,897,270 | $197,324 | 6.81% | | Total current liabilities | $9,213,148 | $8,525,380 | $687,768 | 8.07% | | Short-term borrowings | $961,451 | $41,705 | $919,746 | 2205.36% | | Total equity | $4,718,918 | $4,351,851 | $367,067 | 8.43% | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The income statement reflects a decline in net income for both the three and six months ended June 30, 2025, primarily due to increased operating and non-operating expenses, despite a rise in net sales | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :---------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net sales | $6,164,425 | $5,962,567 | 3.4% | $12,030,494 | $11,746,198 | 2.4% | | Gross profit | $2,324,388 | $2,180,303 | 6.6% | $4,498,072 | $4,254,958 | 5.7% | | Total operating expenses | $1,947,550 | $1,782,096 | 9.3% | $3,833,289 | $3,536,886 | 8.4% | | Income before income taxes | $338,557 | $386,201 | (12.3)% | $590,194 | $711,382 | (17.0)% | | Net income | $254,880 | $295,544 | (13.8)% | $449,272 | $544,438 | (17.5)% | | Basic earnings per share | $1.83 | $2.12 | (13.7)% | $3.23 | $3.91 | (17.4)% | | Diluted earnings per share | $1.83 | $2.11 | (13.3)% | $3.23 | $3.89 | (17.0)% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three and six months ended June 30, 2025, increased significantly year-over-year, primarily driven by positive foreign currency translation adjustments, offsetting the decline in net income | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net income | $254,880 | $295,544 | (13.8)% | $449,272 | $544,438 | (17.5)% | | Other comprehensive income (loss), net of income taxes | $140,511 | $18,165 | 673.5% | $193,524 | $(58,867) | 428.6% | | Comprehensive income | $395,391 | $313,709 | 26.0% | $642,796 | $485,571 | 32.4% | [Condensed Consolidated Statements of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Total equity increased from January 1, 2025, to June 30, 2025, driven by net income and other comprehensive income, partially offset by cash dividends declared **Total Parent Equity (in thousands):** | Metric | January 1, 2025 | June 30, 2025 | | :------------------------------------ | :-------------- | :------------ | | Total Parent Equity | $4,337,407 | $4,702,913 | | Noncontrolling interests in subsidiaries | $14,444 | $16,005 | | Total Equity | $4,351,851 | $4,718,918 | **Key Changes (Six Months Ended June 30, 2025):** * Net income: $449,272 * Other comprehensive income, net of tax: $193,524 * Cash dividend declared: $(286,216) * Shares issued from employee incentive plans: $(15,254) * Share-based compensation: $24,180 * Noncontrolling interest activities: $1,561 [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly decreased for the six months ended June 30, 2025, compared to the prior year, while net cash used in investing activities also decreased, and financing activities shifted from a net use to a net provision of cash | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (in thousands) | % Change | | :------------------------------------------ | :--------------------------- | :--------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $169,115 | $611,915 | $(442,800) | (72.4)% | | Net cash used in investing activities | $(317,950) | $(762,026) | $444,076 | (58.3)% | | Net cash provided by (used in) financing activities | $102,527 | $(382,326) | $484,853 | 126.8% | | Net decrease in cash and cash equivalents | $(21,998) | $(546,730) | $524,732 | (96.0)% | | Cash and cash equivalents at end of period | $457,993 | $555,277 | $(97,284) | (17.5)% | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide essential context and detail for the condensed consolidated financial statements, covering accounting policies, recent pronouncements, segment performance, debt, employee benefits, acquisitions, and commitments, crucial for a comprehensive understanding of the company's financial position and results [1. General](index=9&type=section&id=1.General) This section outlines the basis of presentation for the unaudited interim financial statements, discusses recent accounting pronouncements, details prepaid expenses, derivative instruments used for hedging, fair value of financial instruments, guarantees, supply chain finance programs, and earnings per share calculations - The company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), effective for fiscal years ending **December 31, 2025**, and after **December 15, 2026**, respectively[28](index=28&type=chunk)[29](index=29&type=chunk) **Prepaid Expenses and Other Current Assets (in thousands):** | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Prepaid expenses | $170,430 | $118,401 | | Consideration receivable from vendors | $969,800 | $972,842 | | Other current assets | $500,744 | $584,067 | | **Total** | **$1,640,974** | **$1,675,310** | - The company uses derivative and non-derivative instruments, primarily forward contracts and foreign currency debt, to mitigate foreign exchange rate risks, with net investment hedges showing a significant loss recognized in AOCL before reclassifications for the six months ended June 30, 2025[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The company guarantees approximately **$573 million** in borrowings for independently controlled automotive parts stores and businesses, regularly monitoring performance and maintaining compliance with covenants. No material losses have been incurred to date[36](index=36&type=chunk)[37](index=37&type=chunk) - Outstanding payment obligations to financial institutions under the Supply Chain Finance (SCF) program were **$3.2 billion** as of June 30, 2025, down from **$3.3 billion** at December 31, 2024. The amount settled through the SCF program for the six months ended June 30, 2025, was **$2.2 billion**[41](index=41&type=chunk)[42](index=42&type=chunk) **Earnings Per Share (in thousands, except per share data):** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $254,880 | $295,544 | $449,272 | $544,438 | | Weighted average common shares outstanding | 138,990 | 139,358 | 138,887 | 139,394 | | Diluted earnings per share | $1.83 | $2.11 | $3.23 | $3.89 | [2. Segment Information](index=12&type=section&id=2.%20Segment%20Information) The company operates in two reportable segments: Automotive and Industrial. This section provides a detailed financial summary for each segment, including net sales, gross profit, operating expenses, and EBITDA, along with a reconciliation of segment EBITDA to net income and a breakdown of assets and capital expenditures by segment and geography **Automotive Segment Financial Information (in thousands):** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net sales | $3,912,281 | $3,726,991 | 5.0% | $7,577,169 | $7,301,011 | 3.8% | | Gross profit | $1,637,032 | $1,507,689 | 8.6% | $3,145,096 | $2,919,993 | 7.7% | | Operating expenses | $1,299,040 | $1,144,820 | 13.5% | $2,521,597 | $2,237,448 | 12.7% | | EBITDA | $337,992 | $362,869 | (6.9)% | $623,499 | $682,545 | (8.7)% | | Gross margin | 41.8% | 40.5% | 1.3 pp | 41.5% | 40.0% | 1.5 pp | | EBITDA margin | 8.6% | 9.7% | (1.1) pp | 8.2% | 9.3% | (1.1) pp | **Industrial Segment Financial Information (in thousands):** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net sales | $2,252,144 | $2,235,576 | 0.7% | $4,453,325 | $4,445,187 | 0.2% | | Gross profit | $687,329 | $680,062 | 1.1% | $1,352,916 | $1,342,373 | 0.8% | | Operating expenses | $399,191 | $395,102 | 1.0% | $786,067 | $778,426 | 1.0% | | EBITDA | $288,138 | $284,960 | 1.1% | $566,849 | $563,947 | 0.5% | | Gross margin | 30.5% | 30.4% | 0.1 pp | 30.4% | 30.2% | 0.2 pp | | EBITDA margin | 12.8% | 12.7% | 0.1 pp | 12.7% | 12.7% | 0.0 pp | **Total Assets by Segment (in thousands):** | Segment | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Automotive | $11,337,753 | $10,075,903 | | Industrial | $3,464,425 | $3,532,669 | | Corporate | $656,717 | $583,199 | | Goodwill and other intangible assets | $4,972,172 | $4,677,622 | | **Total assets** | **$20,431,067** | **$18,869,393** | **Net Sales by Geographical Region (in thousands):** | Region | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :---------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | United States | $3,991,977 | $3,899,904 | 2.4% | $7,845,755 | $7,683,833 | 2.1% | | Europe | $1,013,110 | $961,854 | 5.3% | $1,985,975 | $1,938,636 | 2.4% | | Canada | $547,322 | $531,711 | 2.9% | $1,010,796 | $1,004,514 | 0.6% | | Australasia | $586,697 | $546,648 | 7.3% | $1,139,051 | $1,076,481 | 5.8% | | Mexico | $25,319 | $22,450 | 12.8% | $48,917 | $42,734 | 14.5% | | **Total net sales** | **$6,164,425** | **$5,962,567** | **3.4%** | **$12,030,494** | **$11,746,198** | **2.4%** | [3. Accounts Receivable Sales Agreement](index=15&type=section&id=3.%20Accounts%20Receivable%20Sales%20Agreement) The company maintains an Accounts Receivable Sales Agreement (A/R Sales Agreement) to continuously sell designated pools of receivables, with approximately $1.0 billion outstanding as of June 30, 2025. Fees incurred under this agreement are recorded as other non-operating expense - The A/R Sales Agreement has a one-year term expiring in **January 2026**, allowing the company to sell receivables to unaffiliated financial institutions up to a maximum of approximately **$1.0 billion**[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - Fees related to the A/R Sales Agreement totaled **$26 million** for the six months ended June 30, 2025, down from **$31 million** in the prior year period, and are recorded within other non-operating expense (income)[55](index=55&type=chunk) [4. Debt](index=16&type=section&id=4.%20Debt) The company amended its Unsecured Revolving Credit Facility and Commercial Paper Program in March 2025, increasing borrowing capacities to $2.0 billion each. As of June 30, 2025, there were no outstanding borrowings under the Revolving Credit Facility, but $922 million was outstanding under the Commercial Paper Program, used partly to repay senior notes - The Unsecured Revolving Credit Facility was expanded from **$1.5 billion to $2.0 billion** and extended to **March 20, 2030**. No outstanding borrowings as of June 30, 2025[56](index=56&type=chunk) - The Commercial Paper Program's maximum borrowing capacity was increased from **$1.5 billion to $2.0 billion**. **$922 million** was outstanding as of June 30, 2025, with a weighted average interest rate of **4.69%**[57](index=57&type=chunk) - Commercial paper borrowings were used to repay **$500 million** of **1.75%** Unsecured Senior Notes due **February 1, 2025**[59](index=59&type=chunk) - The company was in compliance with all debt covenants, including the maximum debt to EBITDA ratio, as of June 30, 2025[60](index=60&type=chunk) [5. Employee Benefit Plans](index=16&type=section&id=5.%20Employee%20Benefit%20Plans) Net periodic benefit income from pension plans shifted to a loss for the three and six months ended June 30, 2025, primarily due to a significant reduction in the expected return on plan assets following the Board's approval to terminate the frozen U.S. qualified defined benefit pension plan **Net Periodic Loss (Income) from Pension Plans (in thousands):** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Service cost | $1,576 | $1,711 | $3,101 | $3,438 | | Interest cost | $22,931 | $25,324 | $45,760 | $50,689 | | Expected return on plan assets | $(29,222) | $(44,339) | $(58,305) | $(88,743) | | Amortization of prior service cost | $285 | $281 | $570 | $562 | | Amortization of actuarial loss | $4,619 | $3,567 | $9,241 | $7,134 | | **Net periodic loss (income)** | **$189** | **$(13,456)** | **$(26,920)** | **$367** | - The Board of Directors approved the termination of the frozen U.S. qualified defined benefit pension plan, effective **September 30, 2024**. The investment strategy was adjusted to fully hedge plan obligations, leading to a significant reduction in expected return on plan assets in **2025**[62](index=62&type=chunk) [6. Acquisitions](index=17&type=section&id=6.%20Acquisitions) The company acquired several businesses for approximately $211 million during the six months ended June 30, 2025, recording $103 million in goodwill and other intangible assets. These acquisitions contributed $37 million in Automotive revenue and $29 million in Industrial revenue - Acquisitions totaled approximately **$211 million** (net of cash acquired) for the six months ended June 30, 2025, compared to **$651 million** in the prior year period[64](index=64&type=chunk) - Approximately **$103 million** of goodwill and other intangible assets were recorded, primarily from a U.S. Industrial segment acquisition. Acquired intangible assets included **$50 million** in customer relationships with **20-year** amortization lives[64](index=64&type=chunk) - Current year acquisitions contributed approximately **$37 million** in Automotive revenue and **$29 million** in Industrial revenue for the six months ended June 30, 2025[64](index=64&type=chunk) [7. Accumulated Other Comprehensive Loss](index=17&type=section&id=7.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated Other Comprehensive Loss (AOCL) improved significantly for the six months ended June 30, 2025, primarily due to positive foreign currency translation adjustments, partially offset by pension and other post-retirement benefit adjustments **Changes in Accumulated Other Comprehensive Loss by Component (in thousands):** | Component | January 1, 2025 | June 30, 2025 | Change | | :-------------------------------- | :-------------- | :------------ | :----- | | Pension and Other Post Retirement Benefits | $(581,000) | $(573,633) | $7,367 | | Foreign Currency Translation | $(680,743) | $(494,586) | $186,157 | | **Total AOCL** | **$(1,261,743)** | **$(1,068,219)** | **$193,524** | - Other comprehensive income, net of income taxes, was **$193,524 thousand** for the six months ended June 30, 2025, a significant improvement from a loss of **$58,867 thousand** in the prior year period[65](index=65&type=chunk)[66](index=66&type=chunk) [8. Commitments and Contingencies](index=17&type=section&id=8.%20Commitments%20and%20Contingencies) The company is involved in various legal matters, including asbestos-related product liability claims, for which it maintains a liability and insurance receivable. The estimated asbestos liability decreased slightly as of June 30, 2025, and there are no material environmental liabilities to disclose - The company believes its insurance coverage and defense will prevent a material adverse effect from legal claims and lawsuits[67](index=67&type=chunk) - As of June 30, 2025, there were **2,864** pending asbestos lawsuits. The accrued liability for pending and future claims was **$240 million** (discounted at **4.24%**), within a calculated range of **$212 million to $302 million**[71](index=71&type=chunk) - The receivable for estimated insurance recoveries related to asbestos claims was **$40 million** as of June 30, 2025, down from **$44 million** at December 31, 2024[72](index=72&type=chunk) - No environmental matters requiring disclosure under SEC Regulation S-K Item 103 were identified for the period[73](index=73&type=chunk) [9. Restructuring and Other Costs](index=18&type=section&id=9.%20Restructuring%20and%20Other%20Costs) The company incurred $100 million in restructuring and other costs for the six months ended June 30, 2025, as part of a global initiative approved in February 2024 to improve efficiency. Total expected costs for 2024-2025 are between $400 million and $430 million, with substantial completion anticipated by the end of 2025 - A global restructuring initiative, approved in **February 2024**, aims to align assets and improve business efficiency, including a voluntary retirement offer and optimization of distribution centers and facilities[74](index=74&type=chunk) **Restructuring and Other Costs (in thousands):** | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Restructuring and other costs | $45,712 | $29,760 | $100,482 | $112,802 | | Liability as of June 30, 2025 | $32,831 | $28,815 | $32,831 | $28,815 | - Total expected costs for the global restructuring initiative are between **$400 million and $430 million** for **2024 and 2025**, with substantial completion expected by the end of **2025**[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three and six months ended June 30, 2025, discussing key drivers, segment results, and liquidity, against a backdrop of challenging market conditions and strategic initiatives [Overview](index=20&type=section&id=Overview) Genuine Parts Company (GPC) is a global service organization with nearly a century of growth, operating in North America, Europe, and Australasia. Its Automotive business accounts for 63% of total revenues, and the Industrial business accounts for 37% for the six months ended June 30, 2025 - GPC operates in North America, Europe, and Australasia with over **10,700 locations** as of June 30, 2025[84](index=84&type=chunk) - The Automotive business generated **63%** of total revenues, while the Industrial business generated **37%** for the six months ended June 30, 2025[84](index=84&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) The company's second-quarter results were impacted by ongoing market weakness, cost inflation, and new global trade tariffs. Despite these challenges, net sales increased, and gross margin improved due to strategic initiatives and acquisitions, though net income declined due to higher expenses and lower pension income - Second quarter results reflect ongoing weakness in market conditions, persistent cost inflation, recently enacted tariffs in the U.S., ongoing trade uncertainty, high interest rates, and cautious customers[86](index=86&type=chunk) **Key Financial Highlights (in thousands, except per share data):** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net sales | $6,164,425 | $5,962,567 | 3.4% | $12,030,494 | $11,746,198 | 2.4% | | Net income | $254,880 | $295,544 | (13.8)% | $449,272 | $544,438 | (17.5)% | | Diluted EPS | $1.83 | $2.11 | (13.3)% | $3.23 | $3.89 | (17.0)% | | Gross margin | 37.7% | 36.6% | 1.1 pp | 37.4% | 36.2% | 1.2 pp | | Total adjusted EBITDA | $547,498 | $569,349 | (3.8)% | $1,020,591 | $1,085,872 | (6.0)% | - Net sales growth was driven by a **2.6%** benefit from acquisitions and a **0.6%** favorable foreign currency impact for the three months ended June 30, 2025. Comparable sales were essentially flat[94](index=94&type=chunk) - Automotive net sales increased **5.0%** for the three months ended June 30, 2025, driven by acquisitions (**3.4%**) and favorable foreign currency (**1.2%**). Industrial net sales increased **0.7%**, primarily from acquisitions (**1.3%**), despite a weak industrial backdrop[97](index=97&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - Gross margin improved by **110 basis points** for the three months and **120 basis points** for the six months ended June 30, 2025, reflecting successful strategic pricing and sourcing initiatives and prior-year acquisitions[101](index=101&type=chunk) - SG&A expenses increased by **7.5%** for the three months and **8.0%** for the six months ended June 30, 2025, primarily due to recent acquisitions (personnel and rent costs) and planned salary/merit adjustments. Global restructuring initiatives yielded **$59 million** in operational savings for the six-month period[102](index=102&type=chunk)[103](index=103&type=chunk) - Non-operating expenses increased significantly, primarily due to an **$18 million** increase in net interest expense and a **$14 million** decrease in pension income for the three months ended June 30, 2025, related to increased borrowings and changes in pension investment strategy[109](index=109&type=chunk)[110](index=110&type=chunk) - The effective income tax rate increased to **24.7%** for the three months and **23.9%** for the six months ended June 30, 2025, mainly due to a reduction of excess tax stock compensation benefits and comparative restructuring costs[111](index=111&type=chunk) - Automotive EBITDA declined **6.9%** for the three months and **8.7%** for the six months ended June 30, 2025, with EBITDA margin decreasing to **8.6%** and **8.2%** respectively, due to inflation-driven cost increases and loss of fixed cost leverage[115](index=115&type=chunk)[116](index=116&type=chunk) - Industrial EBITDA increased **1.1%** for the three months and **0.5%** for the six months ended June 30, 2025, with EBITDA margin holding steady at **12.8%** and **12.7%** respectively, despite a challenging macroeconomic environment[118](index=118&type=chunk) [Financial Condition](index=28&type=section&id=Financial%20Condition) The company's cash and cash equivalents decreased, while accounts receivable, inventory, and total debt increased as of June 30, 2025, reflecting increased revenues, product demand, and strategic financing activities **Key Financial Condition Metrics (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------ | :---------------- | :-------------------- | :------- | | Cash and cash equivalents | $458,000 | $480,000 | $(22,000) | (4.6)% | | Accounts receivable | $2,601,000 | $2,183,000 | $418,000 | 19.1% | | Inventory | $5,774,000 | $5,514,000 | $260,000 | 4.7% | | Accounts payable | $5,997,000 | $5,924,000 | $73,000 | 1.2% | | Total debt | $4,800,000 | $4,278,000 | $522,000 | 12.2% | - Net cash provided by operating activities decreased to **$169 million** for the six months ended June 30, 2025, from **$612 million** in the prior year, mainly due to lower net income and working capital changes[132](index=132&type=chunk)[133](index=133&type=chunk) - Net cash provided by financing activities was **$103 million**, driven by **$917 million** in net proceeds from the commercial paper program, partially offset by **$500 million** debt repayment and **$277 million** in dividends paid[133](index=133&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $458 million in cash and $2 billion in undrawn capacity on its Revolving Credit Agreement. It expects existing credit lines, commercial paper, and operating cash flow to fund future operations, while continuing strategic investments, dividends, and share repurchases - As of June 30, 2025, the company had **$458 million** in cash and cash equivalents and **$2 billion** in undrawn capacity on its Revolving Credit Agreement[135](index=135&type=chunk) - The Board of Directors approved a **3%** increase in the regular quarterly cash dividend for **2025**, marking the **69th** consecutive year of increased dividends[138](index=138&type=chunk) - The Unsecured Revolving Credit Facility and commercial paper program borrowing capacities were both expanded to **$2.0 billion** in **March 2025**[139](index=139&type=chunk) - Key capital deployment priorities include reinvestment in businesses through capital expenditures, mergers and acquisitions, dividends, and share repurchases[141](index=141&type=chunk) - The total average cost of debt was **3.98%** at June 30, 2025, and the company remains in compliance with all debt covenants[142](index=142&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to market risk has not materially changed since December 31, 2024, as referenced in its 2024 Annual Report on Form 10-K - Market risk exposure has not materially changed since **December 31, 2024**[144](index=144&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. There have been no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of **June 30, 2025**, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[145](index=145&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended **June 30, 2025**[146](index=146&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from the Commitments and Contingencies Footnote in the Notes to Condensed Consolidated Financial Statements - Legal proceedings information is detailed in the Commitments and Contingencies Footnote (**Note 8**) within Item 1 of Part I[147](index=147&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company advises careful consideration of risk factors previously reported in its 2024 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, noting that additional unknown or immaterial risks could also adversely affect the business - Investors should consider risk factors from the **2024 Annual Report on Form 10-K** and the **Quarterly Report on Form 10-Q** for the quarter ended **March 31, 2025**[148](index=148&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended June 30, 2025, the company purchased 142,605 shares of common stock at an average price of $118.54 per share, primarily consisting of shares surrendered by employees for tax withholding obligations. Approximately 7.5 million shares remain available for repurchase under the existing authorization **Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025):** | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | | :-------------------------- | :----------------------------- | :--------------------------- | :------------------------------------------------------------------- | | April 1, 2025 through April 30, 2025 | 11,424 | $117.10 | 7,452,811 | | May 1, 2025 through May 31, 2025 | 131,181 | $118.66 | 7,452,811 | | June 1, 2025 through June 30, 2025 | — | $— | 7,452,811 | | **Totals** | **142,605** | **$118.54** | **7,452,811** | - Shares purchased primarily consist of shares surrendered by employees to satisfy tax withholding obligations related to restricted stock vesting and share appreciation rights exercise[151](index=151&type=chunk) - Approximately **7.5 million** shares remain available for repurchase under the **15 million** share authorization approved by the Board of Directors on **August 21, 2017**[151](index=151&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the fiscal quarter ended June 30, 2025 - No Rule 10b5-1 trading plans were adopted, modified, or terminated by directors or executive officers during the quarter[151](index=151&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or furnished as part of the report, including organizational documents, certifications, and XBRL-related documents - Exhibits include Amended and Restated Articles of Incorporation, By-Laws, CEO and CFO certifications (pursuant to SEC Rule 13a-14(a) and 18 U.S.C. Section 1350), and XBRL taxonomy documents[152](index=152&type=chunk) [Signatures](index=32&type=section&id=Signatures) The report is duly signed on behalf of Genuine Parts Company by Bert Nappier, Executive Vice President and Chief Financial Officer, on July 22, 2025 - The report was signed by Bert Nappier, Executive Vice President and Chief Financial Officer, on **July 22, 2025**[154](index=154&type=chunk)

Core Insights - Genuine Parts Company (GPC) reported second-quarter 2025 adjusted earnings of $2.10 per share, exceeding the Zacks Consensus Estimate of $2.08, but down from $2.44 per share in the same quarter last year [1][9] - The company achieved net sales of $6.16 billion, surpassing the Zacks Consensus Estimate of $6.11 billion, reflecting a year-over-year growth of 3.4% driven by acquisitions, favorable currency exchange, and a slight rise in comparable sales [1][9] Segmental Performance - The Automotive segment's net sales reached $3.9 billion, a 5% increase year over year, benefiting from acquisitions and exceeding the estimate of $3.84 billion; however, EBITDA decreased by 6.9% to $338 million, with an EBITDA margin of 8.6%, down 110 basis points from the previous year [3] - The Industrial Parts segment's net sales grew by 0.7% year over year to $2.3 billion, also aided by acquisitions, and surpassed the estimate of $2.26 billion; EBITDA increased by 1.1% to $288 million, with a margin of 12.8%, up 10 basis points year over year [4] Financial Performance - As of June 30, 2025, the company had cash and cash equivalents of $458 million, down from $480 million at the end of 2024; long-term debt slightly increased to $3,744 million from $3,742 million [5] - GPC exited the second quarter with total liquidity of $1.5 billion [5] 2025 Guidance Revision - For 2025, GPC revised its overall sales growth expectation to 1-3%, down from the previous range of 2-4%; automotive sales are now anticipated to grow by 1.5-3.5%, and industrial sales growth expectations were trimmed to 1-3% from 2-4% [6] - The company now projects adjusted earnings per share between $7.50 and $8, down from the prior range of $7.75-$8.25; operating cash flow is expected to be between $1.1 billion and $1.3 billion, and free cash flow is narrowed to $700-$900 million from the previous forecast of $800 million-$1 billion [7]

For the quarter ended June 2025, Genuine Parts (GPC) reported revenue of $6.16 billion, up 3.4% over the same period last year. EPS came in at $2.10, compared to $2.44 in the year-ago quarter. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. Here is how Genuine Parts performed in the just reported quarter in terms of the metrics most ...

Financial Data and Key Metrics Changes - Total GPC sales for Q2 2025 were $6.2 billion, an increase of 3.4% compared to the same period last year [6][33] - Gross margin expanded by 110 basis points year-over-year to 37.7%, driven by strategic pricing and sourcing initiatives [6][34] - Adjusted EPS for Q2 2025 was $2.10, down 14% from the prior year, reflecting lower pension income and higher depreciation and interest expenses [31][32] Business Line Data and Key Metrics Changes - Global Industrial segment sales were $2.3 billion, a 1% increase year-over-year, with comparable sales essentially flat [13] - Global Automotive segment sales increased by 5%, with EBITDA of $338 million, representing an 8.6% margin, down 110 basis points from the previous year [17] - E-commerce sales in the Motion segment accounted for 40% of sales, up over 10% from the start of 2024 [16] Market Data and Key Metrics Changes - The U.S. Automotive segment saw total sales up 4%, with comparable sales flat [20] - Canadian sales increased approximately 5% in local currency, with comparable sales up about 4% [25] - European sales were flat in local currency, with comparable sales down approximately 1% [26] Company Strategy and Development Direction - The company is focused on managing through tariff impacts and maintaining customer support through strategic initiatives [8][10] - Continued investment in digital capabilities and e-commerce to enhance customer experience and drive growth [16][29] - The company aims to control costs and improve operational efficiency while navigating a complex external environment [50][51] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for market improvement in the second half of 2025, despite ongoing challenges [12][28] - The impact of tariffs is expected to be more pronounced in the latter half of the year, influencing revenue and cost structures [9][41] - Management highlighted the importance of agility and discipline in operations to adapt to changing market conditions [50][51] Other Important Information - The company incurred $46 million in restructuring costs during the quarter, with a focus on long-term cost savings [31][36] - Total adjusted EBITDA margin for the quarter was 8.9%, down 60 basis points year-over-year [37] - The company returned $277 million to shareholders through dividends in the first half of 2025 [39] Q&A Session Summary Question: Can you talk about fill rates in the independent NAPA stores? - Management noted significant improvement in independent owner inventory positions, with sales out aligning well with company-owned stores [55] Question: Are you able to pass through cost increases due to tariffs? - Management confirmed that pricing dynamics are balanced with supplier cost increases, though not necessarily benefiting gross margin [56][57] Question: What are your expectations for same SKU inflation in the U.S. business? - Management indicated that inflation assumptions are consistent across segments, with a focus on the NAPA business [66] Question: Should we assume the rebasing of global auto margins is the new baseline? - Management emphasized ongoing efforts to improve profitability despite current inflationary pressures, aiming for better margins in the second half [69] Question: Can you discuss the cadence of growth in the motion business? - Management expressed confidence in positive trends for the motion business, with expectations for growth to accelerate in the latter half of the year [79][81]

Financial Data and Key Metrics Changes - Total GPC sales for Q2 2025 were $6.2 billion, an increase of 3.4% compared to the same period last year [5][31] - Gross margin expanded by 110 basis points to 37.7%, driven by strategic pricing and sourcing initiatives [5][32] - Adjusted EPS for the quarter was $2.10, down 14% year-over-year, reflecting lower pension income and higher depreciation and interest expenses [30][31] - Adjusted SG&A as a percentage of sales increased to 28.7%, up 150 basis points year-over-year [33] Business Segment Data and Key Metrics Changes - Global Industrial segment sales were $2.3 billion, a 1% increase year-over-year, with comparable sales essentially flat [11] - Global Automotive segment sales increased by 5%, with EBITDA of $338 million, representing an 8.6% margin, down 110 basis points from the previous year [14][15] - E-commerce sales at Motion accounted for 40% of sales, up over 10% from the start of 2024 [13] Market Data and Key Metrics Changes - Industrial activity metrics like industrial production and PMI were trending positively at the start of the year but fell below 50 during the second quarter [12] - In the U.S., total sales for the automotive segment were up 4%, with comparable sales essentially flat [18] - Canada saw total sales increase approximately 5% in local currency, while Europe experienced flat sales with comparable sales down 1% [23][24] Company Strategy and Development Direction - The company is focused on executing strategic initiatives and cost actions to navigate ongoing market challenges, including tariffs and inflation [6][10] - A global cross-functional command center has been established to manage tariff impacts and support customers [8] - The company aims to enhance operations and drive long-term value through disciplined investments and strategic acquisitions [28] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for market improvement in the second half of 2025, despite ongoing challenges [10] - The impact of tariffs is expected to be more pronounced in the latter half of the year, affecting revenue and customer demand [39][41] - Management highlighted the importance of agility and discipline in operations to adapt to the dynamic environment [48] Other Important Information - The company announced a leadership transition in the North America automotive business, with Randy Bro retiring and Alain Moss promoted to President, North America Automotive [16][17] - The company acquired 32 stores from independent owners in the U.S. during the second quarter, strengthening its market presence [22] Q&A Session Summary Question: What are the fill rates in independent NAPA stores? - Management noted improvements in independent owner inventory positions, with sales out aligning well with company-owned stores [51] Question: How is pricing around tariff increases being managed? - Management confirmed that pricing dynamics are balanced with supplier cost increases, though not resulting in a net benefit to gross margin [52][54] Question: What are the expectations for same SKU inflation in the U.S.? - Management indicated that inflation assumptions are consistent across segments, with a focus on the NAPA business [60][62] Question: How does the company view the cadence of price tailwinds into the second half? - Management expects an acceleration of price impacts in the third quarter, with a leveling off in the fourth quarter [56] Question: What is the outlook for the motion business? - Management expressed confidence in positive trends for the motion business, despite moderated growth expectations [72][75]

Group 1: Earnings Performance - Genuine Parts reported quarterly earnings of $2.1 per share, exceeding the Zacks Consensus Estimate of $2.08 per share, but down from $2.44 per share a year ago, representing an earnings surprise of +0.96% [1] - The company posted revenues of $6.16 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.81% and up from $5.96 billion year-over-year [2] - Over the last four quarters, Genuine Parts has surpassed consensus EPS estimates three times [2] Group 2: Stock Performance and Outlook - Genuine Parts shares have increased by approximately 6.1% since the beginning of the year, compared to the S&P 500's gain of 7.2% [3] - The current consensus EPS estimate for the upcoming quarter is $2.09 on revenues of $6.15 billion, and for the current fiscal year, it is $7.81 on revenues of $24.13 billion [7] - The estimate revisions trend for Genuine Parts was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Group 3: Industry Context - The Automotive - Retail and Wholesale - Parts industry is currently in the top 40% of over 250 Zacks industries, suggesting a favorable outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Global sales increased by 3.4% to $6.2 billion[11] - Gross margin improved by 110 bps to 37.7%[11] - Adjusted diluted EPS decreased by 13.9% to $2.10[11] - Adjusted EBITDA decreased by 3.8% to $547 million[11] - The company has ample liquidity with $1.5 billion[11] Segment Performance - Industrial global sales increased by 0.7% to $2.3 billion, with global comps decreasing by 0.1%[13] - Industrial segment EBITDA increased by 1.1% to $288 million, with segment EBITDA margin improving by 10 bps to 12.8%[13] - Automotive global sales increased by 5.0% to $3.9 billion, with global comps increasing by 0.4%[16] - Automotive segment EBITDA decreased by 6.9% to $338 million, with segment EBITDA margin decreasing by 110 bps to 8.6%[16] Outlook - Revised 2025 total sales growth outlook to 1% to 3%[33] - Revised 2025 adjusted diluted EPS outlook to $7.50 to $8.00[33] - Revised 2025 cash from operations outlook to $1.1 billion to $1.3 billion[33] - Revised 2025 free cash flow outlook to $700 million to $900 million[33]