Genuine Parts Q1 Earnings Call Highlights

Key Points

• Genuine Parts reported Q1 sales of about $6.3 billion (≈7% YoY) with adjusted EPS of $1.77 and adjusted EBITDA up ~5%, saying results were ahead of expectations while reaffirming full‑year guidance of adjusted EPS $7.50–$8.00, but warned the Iran conflict could shave roughly $10–$20 million of EBITDA in Q2.
• The Global Industrial segment showed particular strength (sales ≈$2.3 billion, EBITDA +13% and margin up 90 bps), while North American automotive improved sequentially with company‑owned stores outpacing independents and the overall NAPA system growing about 4% in the quarter.
• The planned split into separate Global Automotive and Global Industrial public companies remains on track for Q1 2027, with expected incremental run‑rate dis‑synergies and standalone costs of about $100–$150 million.

Genuine Parts NYSE: GPC reported first-quarter 2026 results that management said were ahead of internal expectations, while reaffirming its full-year outlook amid uncertainty tied to the conflict in Iran and broader geopolitical volatility.

First-quarter results and key drivers

Chair-Elect and CEO Will Stengel said the company delivered “financial results ahead of our expectations” in the quarter and noted sequential improvement across all three business segments. Total company sales were $6.3 billion, up about $400 million, or roughly 7%, versus the prior year.

Executive Vice President and CFO Bert Nappier said first-quarter adjusted EBITDA rose 5% and adjusted EPS was $1.77, “slightly above prior year.” Nappier said results reflected higher sales and benefits from restructuring initiatives, partially offset by cost inflation and higher operating expenses. He also reiterated that depreciation and interest expense were headwinds in the quarter, negatively impacting earnings by $0.09.

Nappier said first-quarter adjusted results included non-recurring costs related to the company’s global restructuring program and planned separation of its automotive and industrial businesses. Those items totaled $75 million of pre-tax costs, or $56 million after tax.

On the top line, Nappier said sales increased 6.8%, driven by a 240-basis-point improvement in comparable sales, a 130-basis-point contribution from acquisitions, and a 320-basis-point benefit from foreign currency. Price inflation was “up low single digits” across segments, including about 3% in North American automotive and industrial, and about 2% in international automotive.

Gross margin was 37.3%, up 20 basis points year over year, which Nappier attributed primarily to strategic pricing and sourcing initiatives, partially offset by inflation and tariffs on product costs. Adjusted SG&A was 29.4% of sales, up 50 basis points, with year-over-year growth driven largely by foreign currency and acquisitions and, within core SG&A, by higher people-related costs and inflation in healthcare, rent, and freight.

Segment performance: Industrial strength, auto improving sequentially

In the Global Industrial segment, Stengel said sales were $2.3 billion, up about 5% year over year, with comparable sales up roughly 4% and price inflation contributing about 3%. He said average daily sales growth was “mid-single digit” across all three months of the quarter. Segment EBITDA was $314 million, up about 13%, with EBITDA margin at 13.6% of sales—an increase of 90 basis points year over year.

Stengel pointed to Motion’s balanced growth across large corporate accounts and local accounts and said the company saw growth in 10 of 14 industrial end markets tracked, including food products, automotive, iron and steel, mining, and fabricated metals, partially offset by softer demand in pulp and paper, lumber and wood, and rubber and plastic. He also said the core MRO business (about 80% of Motion sales) rose more than 5%, and capital-intensive project-related activity improved sequentially, up about 4%.

In North America Automotive, Stengel said sales increased about 4.5% and comparable sales rose about 2%, with sequential improvement. Segment EBITDA was $156 million, up 6%, with margin at 6.6% of sales. Stengel said year-over-year improvement reflected strategic initiatives, partially offset by inflation in wages, healthcare, rent, and freight. U.S. comparable sales rose about 3%, with price contributing about 3%.

Stengel highlighted a split in performance between company-owned and independent stores: comparable sales at company-owned stores increased about 5.5%, while independent same-store purchases rose about 1%. Looking at the broader “NAPA system” (including company-owned sales and sales to end customers from independent stores), Stengel said sales growth was 4% in the first quarter, up from 2% in the fourth quarter. Commercial customer comparable sales increased about 5%, while retail was up about 1%.

In Canada, Stengel said sales increased about 4% in local currency, while comparable sales declined about 2%, citing trade disputes, tariffs, and low consumer confidence. He said the Benson acquisition provided a “tailwind” and that the company was ahead of its financial and operational plans for the deal.

International Automotive sales rose about 13% with comparable sales “slightly positive.” Segment EBITDA was $145 million, up 5%, but EBITDA margin declined 80 basis points to 9.1% of sales. Stengel and Nappier both cited inflationary cost pressures—particularly salaries and wages, rent, and freight—partially offset by restructuring initiatives and cost actions. In Europe, sales rose about 1% in local currency, while comparable sales were down about 0.5%.

In Asia-Pacific, Stengel said total and comparable sales rose about 4%. He noted that Australia and New Zealand were impacted by reduced fuel availability, elevated fuel prices, and weaker consumer sentiment, as well as two interest-rate increases in Australia during 2026, but said in-flight initiatives were driving “impressive relative share gains.”

Cash flow, capital spending, and shareholder returns

Nappier said the company generated $64 million in operating cash flow in the quarter, aided by a roughly $200 million improvement in working capital, partially offset by tax-planning payments. Genuine Parts invested about $100 million in capital expenditures, focused on supply chain and IT modernization, and returned about $142 million to shareholders through dividends.

2026 outlook reaffirmed amid Iran conflict uncertainty

Management reaffirmed its 2026 guidance. Nappier said the company continues to expect diluted EPS (including restructuring expenses) of $6.10 to $6.60 and adjusted diluted EPS of $7.50 to $8.00. He said the company balanced first-quarter outperformance against “a more prudent view” of the second and third quarters due to uncertainty related to the conflict in Iran.

For sales, the company maintained its expectation for total sales growth of 3% to 5.5%, assuming roughly flat market growth and about 2% benefit from pricing (split between inflation and tariffs), plus contributions from M&A carryover, strategic initiatives, and foreign exchange.

On the conflict’s impact, Nappier said the company expects the effect to be most pronounced in the second quarter and estimated “about $10 million-$20 million of EBITDA” downside risk as the net impact. He said higher cost of goods sold and operating expenses—including freight and fuel—would be balanced against pricing actions and potentially “muted expectations on demand.” He also said the company’s exposure to products sourced from the Middle East is less than 0.5% of total purchases.

In Q&A, Nappier said pricing for the year is expected to remain in line with the company’s guidance assumptions, emphasizing that the duration and severity of disruption would be a key variable. He also cautioned analysts not to extrapolate the quarter’s 320-basis-point FX tailwind to the rest of the year.

Separation plan progress and expected dis-synergies

Stengel said the company’s planned separation of its Global Automotive and Global Industrial businesses into two publicly traded companies is “on track and progressing well,” with a target completion in the first quarter of 2027. He said the process is being managed through a “disciplined, centralized” operating cadence with advisors and internal leaders.

Both Stengel and Nappier reiterated expected incremental run-rate dis-synergies and standalone costs of $100 million to $150 million, in line with initial estimates. Nappier said this range consists of two categories:

• Dis-synergy costs of $50 million to $75 million, tied to indirect sourcing scale loss and replication of back-office and technology functions, expected to be “evenly split” between Global Automotive and Global Industrial.
• Incremental standalone costs of $50 million to $75 million related to building the new public company structure, with “the vast majority” expected to sit with Global Industrial.

Nappier added that the estimate excludes one-time separation costs such as legal and banking fees and does not include any future allocation of current corporate expense, which he said the company will address as planning progresses.

Asked about culture during the separation, Stengel said the company’s cross-functional, global project structure reflects a culture built on “team” and “collaboration,” and said he expects the work to “amplify” how the organization operates. On capital allocation and dividends post-separation, Stengel said the company still has work to do, but emphasized that the dividend remains important and said both companies are intended to maintain investment-grade ratings.

Stengel also noted that longtime GPC leader Paul Donahue will retire from the board at the annual meeting, and he credited Donahue with helping shape the company’s strategic foundation and culture.

About Genuine Parts NYSE: GPC

Genuine Parts Company NYSE: GPC is a global distributor of automotive replacement parts, industrial parts and business products with a history dating back to 1928. Headquartered in Atlanta, Georgia, the company operates a broad distribution network and retail presence serving repair shops, independent retailers, industrial customers and commercial accounts. Its business model centers on stocking and delivering a wide range of parts and supplies to support aftermarket and maintenance needs across multiple end markets.

Genuine Parts conducts its operations through several well-known operating groups and subsidiaries.

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