Standard Motor Products (SMP) Down 2.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Standard Motor Products (SMP). Shares have lost about 2.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Standard Motor Products due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Standard Motor Q2 Earnings Miss, Revenues Increase Y/Y

Standard Motor reported second-quarter 2022 adjusted earnings of 93 cents per share, missing the Zacks Consensus Estimate of $1.21. Lower-than-anticipated income from the Engine Management and Temperature Control segments resulted in the downslide. Also, the bottom line declined 26.2% from the prior-year quarter’s $1.26 a share.

Total revenues rose 5% year over year to $359.4 million, surpassing the Zacks Consensus Estimate of $353 million. Gross profit fell to $96.4 million from the year-ago quarter’s $99.4 million. Operating income declined 26% to $27.9 million, owing to an escalation in SG&A expenses, which flared up 11% year over year. SMP lowered its expected consolidated gross margin to nearly 27% from the previous band of 28-29% for 2022.

The board approved a dividend of 27 cents per share, payable on Sep 1, 2022, to stockholders of record on Aug 15, 2022. The company repurchased common shares worth $19.6 million during the quarter under review. Year to date, the company has exhausted the remaining balance of the prior $30 million share repurchase authorization and has authorized a new $30 million common share buyback plan.

Segmental Results

During the reported quarter, revenues from the Engine Management segment totaled $241.9 million, up 3.7% year over year. The upside was driven by the positive impact of acquisitions made in 2021 and the benefit of price increases implemented in the quarter. The figure matched the Zacks Consensus Estimate. The operating income was $21.09 million, down from the prior-year quarter’s $30.5 million and missed the consensus mark of $29.55 million.

Revenues from the Temperature Control segment rose 7.5% year over year to $114.4 million, led by strong pre-season orders, new business wins, price increases and robust customer demand. The figure beat the consensus metric of $108 million. The segment registered an operating income of $12.27 million, down from $13.2 million and missed the consensus mark of $12.64 million.

Revenues from the All Other segment came in at $3.1 million, rising from $2.4 million in the prior-year period and surpassing the consensus mark of $2.5 million. The segment reported an operating loss of $5.47 million, narrower than a loss of $6 million in the corresponding quarter of 2021 and the Zacks Consensus Estimate of a loss of $6 million.

Financial Position

Standard Motor had $14.2 million in cash as of Jun 30, 2022, compared with $21.8 million as of Dec 31, 2021. Net cash provided by operating activities totaled $8.6 million in the second quarter of 2022 against $34.5 million net cash used in operating activities in the corresponding period last year.

In the quarter, the company announced a new five-year $500 million credit facility that includes a $100 million term loan and a $400 million revolving credit facility. This will further bolster its focus on returning value to shareholders.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -34.93% due to these changes.

VGM Scores

Currently, Standard Motor Products has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Standard Motor Products has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Standard Motor Products is part of the Zacks Automotive - Replacement Parts industry. Over the past month, Genuine Parts (GPC), a stock from the same industry, has gained 4.6%. The company reported its results for the quarter ended June 2022 more than a month ago.

Genuine Parts reported revenues of $5.6 billion in the last reported quarter, representing a year-over-year change of +17.1%. EPS of $2.20 for the same period compares with $1.74 a year ago.

Genuine Parts is expected to post earnings of $2.04 per share for the current quarter, representing a year-over-year change of +8.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Genuine Parts has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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