ORLY O Reilly Automotive Inc

Standard Motor Product Inc. (SMP) reported a 23.7% rise in adjusted earnings per share to 73 cents in the third quarter of 2012 from 59 cents in the year-ago quarter, surpassing the Zacks Consensus Estimate by 9 cents. Profits went up 22.6% to $16.8 million from $13.7 million in the year-ago quarter.

Total revenue increased 16.8% to $276.0 million, beating the Zacks Consensus Estimate of $258.0 million. The year-over-year growth in revenues was attributable to the positive impact from the company’s recent acquisitions and strong performance of the company’s Temperature Control segment.

Gross profit improved 20.7% to $77.8 million or 28.2% of sales from $64.5 million or 27.3% in the third quarter of 2011. Cost of sales increased 15.4% to $198.2 million from $171.7 million a year ago. Selling, general and administrative expenses rose 22.2% to $50.9 million from $41.7 million in the year-ago quarter.

Operating income increased 17% to $26.7 million from $22.8 million in the third quarter of 2011. Operating margin was 9.7% versus 9.6% in the year-ago quarter.

Segment Results

Revenues from the Engine Management segment rose 6.4% to $175.8 million from $165.2 million in the year-ago quarter. The segment gross profit went up 17% to $51.3 million or 29.2% of sales from $43.8 million or 26.5% a year ago. Operating profit grew 15.1% to $21.4 million from $18.6 million in the corresponding quarter last year.

Revenues from the Temperature Control segment climbed 39.7% to $95.2 million. Gross profit improved 33.5% to $23.2 million or 24.3% of sales from $17.3 million or 25.4% in the prior-year quarter. Operating profits increased 16.3% to $9.1 million from $7.8 million.

Revenues from All Other segment shot up 71.5% to $4.9 million. Gross profit rose marginally by 1.7% to $3.4 million from $3.3 million. However, the company incurred an operating loss of $3.6 million, which is flat compared with the corresponding quarter of 2011.

Financial Position

Standard Motors had cash balance of $10.9 million as of September 30, 2012, which is in line with the same as of December 31, 2011. Long-term debt of the company was $222 thousand as of September 30, 2012, down from $299 thousand as of December 31, 2011.

In the third quarter of 2012, the company completed the acquisition of Compressor Works for $38.6 million, repurchased $5.0 million worth shares and paid $12.8 million of debt. The company had $60.5 million in total debt as of September 30, 2012.

The company will be paying a quarterly dividend of 9 cents per share on the outstanding common stock on December 3, 2012 to shareholders of record as of November 15, 2012.

Standard Motor, based in Long Island City, New York, was founded in 1919. The company is one of the leading manufacturers, distributors and marketers of automotive replacement parts in the U.S. Further, it enjoys strong brand recognition globally.

Standard Motor is optimistic about the recent acquisitions of BLD, Forecast Trading, and Compressor Works. The integration will generate savings by optimizing the product costs and operating expenses, mostly in 2013. However, the company’s high dependence on Advance Auto Parts Inc. (AAP) and O’Reilly Automotive Inc. (ORLY) for its business may adversely affect the results of the company.

Currently, Standard Motor’s retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating and we have a long-term (more than 6 months) Neutral recommendation on the stock.

 
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