Genuine Parts NYSE: GPC reported higher second-quarter sales and adjusted earnings as growth in its industrial business and margin initiatives helped offset inflationary pressures and costs tied to the Iran conflict, executives said on the company’s earnings call Tuesday.
Chairman and Chief Executive Officer Will Stengel said the company delivered “a strong second quarter” despite a “dynamic global macro environment,” citing total sales of $6.5 billion, up about $400 million, or 6%, from the second quarter of 2025. Adjusted earnings per share rose to $2.15 from $2.10 a year earlier.
Executive Vice President and Chief Financial Officer Bert Nappier said adjusted EPS increased 2.5% year over year, driven by higher sales, particularly in Global Industrial, and benefits from restructuring initiatives. Those gains were partially offset by cost inflation in operating expenses, including impacts from the Iran conflict, as well as an $0.08 headwind from depreciation and interest expense.
Industrial Segment Leads Growth
Genuine Parts’ industrial segment, Motion, posted total sales of $2.4 billion, up about $160 million, or 7%, from the prior year. Comparable sales increased 6%, with price inflation contributing about 2.5%.
Stengel said Motion delivered “an excellent quarter,” with balanced growth across large corporate accounts, small and medium-sized customers and value-added solutions. He pointed to improving industrial sentiment, including six consecutive PMI readings above 50, and said the company saw growth in 11 of the 14 end markets it tracks.
Growth was strongest in equipment and machinery and food products, with additional strength in iron and steel, automotive, mining, fabricated metals, distribution centers and logistics, oil and gas, and equipment rental and leasing. Softer demand in pulp and paper, lumber and wood, and rubber and plastics partially offset those gains.
Motion’s core maintenance, repair and operations business, which accounts for about 80% of segment sales, rose roughly 7% in the quarter. Project-based demand, representing the remaining 20% of sales, increased about 9%, marking its strongest performance since the first quarter of 2023, Stengel said.
Industrial segment EBITDA rose about 10% to $316 million, while EBITDA margin increased 30 basis points to 13.1% of sales.
Automotive Results Mixed Across Regions
In North America Automotive, total sales rose approximately 4%, while comparable sales increased 2.6%. Segment EBITDA was $208 million, up 6%, with EBITDA margin improving 20 basis points year over year to 8.2% of sales.
Stengel said the North America Automotive business continued to navigate a cautious consumer backdrop and persistent inflation, both of which he said were affected by the Iran conflict. U.S. total sales rose about 3%, with comparable sales also up about 3% and price contributing roughly 2.5%.
Average daily sales rose in the low- to mid-single digits in April and May but were roughly flat in June, which Stengel attributed to a softer market tied to higher fuel prices. He said July month-to-date average daily sales had improved and were tracking in line with company expectations.
Company-owned store comparable sales increased about 4%, with commercial sales up around 5.5%. Independent same-store purchases improved sequentially from the first quarter and increased about 1.5% from a year earlier. Stengel said the broader NAPA system, including company-owned sales and sales to end customers from independent stores, delivered 3% sales growth in the quarter.
By customer type, comparable sales to commercial customers rose about 4%, while retail comparable sales declined about 3%. Non-discretionary repair and maintenance and service categories remained relatively strong, rising in the low- to mid-single digits. Discretionary categories improved sequentially and were up low single digits.
In Canada, total sales rose 9% in local currency and comparable sales increased 1%. Stengel said the Benson acquisition continued to provide a tailwind and remained ahead of company financial and operational targets.
International Automotive total sales rose about 8%, while comparable sales increased approximately 1%. Segment EBITDA rose 6% to $150 million, though EBITDA margin declined 20 basis points to 9.4% of sales. Nappier said the margin decline was primarily due to inflation in salaries and wages, rent and freight, partially offset by restructuring and cost actions.
In Europe, total sales increased about 4% in local currency and comparable sales were up about 1%, with notable improvement in the U.K. and Germany. In Asia Pacific, total sales rose about 2% in local currency, with comparable sales up 1%.
Margins, Costs and Cash Flow
Nappier said total company sales growth included a 340-basis-point contribution from comparable sales, a 120-basis-point benefit from acquisitions and a 140-basis-point benefit from foreign currency. Each segment delivered sequentially improved comparable sales growth compared with the first quarter.
Adjusted gross margin increased 20 basis points to 37.9%, driven by strategic pricing and sourcing initiatives, partially offset by higher product costs tied to inflation from the Iran conflict. Adjusted SG&A as a percentage of sales rose 40 basis points to 29.1%.
Nappier said core SG&A increased 4% year over year, with higher healthcare, freight and rent costs. U.S. healthcare expenses were up about 15%, while freight and rent were up mid-single digits. He said people-related costs as a percentage of sales were roughly flat, reflecting restructuring and cost actions.
Year to date, Genuine Parts has incurred $134 million of restructuring costs and realized $55 million of cost savings, including about $30 million in the second quarter. Nappier said the company estimated a $16 million negative EBITDA impact in the quarter from the Iran conflict, in line with its prior expectation of $10 million to $20 million. In response to an analyst question, he said all but $1 million of that impact was in Automotive.
For the first half of 2026, Genuine Parts generated $464 million in cash from operations, aided by an approximately $260 million improvement in net working capital. The company invested $205 million in capital expenditures and returned $288 million to shareholders through dividends.
Guidance Reaffirmed Despite Second-Half Caution
Genuine Parts reaffirmed its 2026 adjusted diluted EPS guidance of $7.50 to $8.00, representing 5% growth at the midpoint compared with 2025. The company expects diluted EPS, including restructuring expenses and year-to-date separation costs, to range from $5.90 to $6.40.
Nappier said first-half results were ahead of internal expectations and, absent second-half headwinds, would have put the company on pace toward the high end of its earnings range. However, the company adopted a more cautious view of the second half for Global Automotive due to volatility around the Iran conflict, uncertainty around improved European market conditions and performance among independent U.S. NAPA owners.
The company continues to expect total sales growth of 3% to 5.5% for the year. Its outlook assumes roughly flat market growth, approximately 2% benefit from pricing, carryover benefits from mergers and acquisitions, about one point of growth from strategic initiatives and about one point from foreign exchange.
Nappier said Genuine Parts now expects $20 million to $30 million of incremental operating costs for the rest of the year related to the Iran conflict, including higher freight and fuel costs. He said the company has not changed its gross margin outlook because it broadly expects to pass through many supplier cost increases.
Separation Plan Remains On Track
Stengel said Genuine Parts remains on track to separate its Global Automotive and Global Industrial businesses into two independent public companies in the first quarter of 2027. He said the standalone audit work has been completed and the company expects to confidentially file a Form 10 with the SEC later this summer.
The company also expects to host investor days for both businesses in early December in New York, where it plans to provide more detail on strategy, financial profiles, capital structures and capital allocation priorities.
Stengel addressed recent market speculation about a potential transaction involving the Global Automotive business and a competitor, saying the company is “not currently in discussions with any competitor.” He said Genuine Parts remains focused on creating two public companies while continuing to evaluate ways to maximize shareholder value.
Nappier also provided preliminary corporate cost allocations tied to the separation. He said 2025 corporate costs were approximately $360 million. The company estimates $210 million to $230 million of current corporate costs will be allocated to Global Automotive, including about $20 million related to asbestos litigation costs. Including expected dis-synergies, Global Automotive is expected to incur about $250 million of additional costs on a pro forma basis.
For Global Industrial, Nappier said $50 million to $75 million of corporate resources will support Motion as a standalone public company, and when combined with expected dis-synergies, the pro forma Global Industrial business is expected to incur about $100 million in additional costs. He said another approximately $50 million of financing fees tied to the company’s accounts receivable program remains under review as part of capital structure planning.
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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