EPS of $1.40 decreased by 21.8% from previous year
Gross margin of 37.1%
Net income of 194.39M
"N/A" - N/A
Genuine Parts Company (0IUX.L) QQ1 2025 Earnings Review: Modest Revenue Growth Amid Margin Pressures and Elevated Leverage
Executive Summary
Genuine Parts Company delivered a modest top-line performance in QQ1 2025, with revenue of $5.867 billion, up 1.4% year over year and 1.66% quarter over quarter. Gross margin remained solid at roughly 37.1% (gross profit of $2.174 billion), but operating income and net income showed more pressure on a year-over-year basis. Net income declined to $194.4 million, a 21.9% drop from the year-ago period, while earnings per share (EPS) stood at $1.40, reflecting a substantial sequential lift of ~45.8% versus the prior quarter but a negative annual comparison due to higher operating costs and a heavier expense base.
From a cash-flow perspective, the company generated negative operating cash flow of about $40.8 million and delivered negative free cash flow of roughly $160.7 million for the quarter, driven largely by a sizable working capital outflow (change in working capital of -$359.0 million) and ongoing capital investments. The balance sheet remains large and liquid in absolute terms (cash of $420.4 million) but is burdened by elevated leverage: total debt of $6.10 billion and net debt of $5.68 billion, with a net debt to EBITDA profile implying meaningful leverage to support the business. The company maintains a conservative current ratio (~1.15) but a low quick ratio (~0.52), underscoring a working-capital-intensive model.
Management commentary was not included in the provided data set, so the analysis relies on disclosed financials and peer benchmarks. The near-term investment thesis hinges on deleveraging progress, working-capital optimization, and stabilization of margins, against a backdrop of continued demand in the automotive aftermarket and Industrial Parts Group. Investors should monitor leverage trajectory, cash-flow normalization, and any announced guidance or strategic initiatives around cost controls, inventory management, and capital allocation.
Key Performance Indicators
Revenue
5.87B
QoQ: 1.66% | YoY:1.43%
Gross Profit
2.17B
37.06% margin
QoQ: 5.00% | YoY:4.77%
Operating Income
342.72M
QoQ: 37.65% | YoY:-14.94%
Net Income
194.39M
QoQ: 46.10% | YoY:-21.90%
EPS
1.40
QoQ: 45.83% | YoY:-21.79%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $5.867B in QQ1 2025, up 1.43% YoY and 1.66% QoQ per the provided metrics.
Revenue and margin trajectory:
- Revenue: $5.867B in QQ1 2025, up 1.43% YoY and 1.66% QoQ per the provided metrics.
- Gross Profit: $2.174B; gross margin 37.06% (0.3706).
- Operating Income: $342.7M; operating margin 5.84% (0.0584).
- Net Income: $194.4M; net margin 3.31% (0.0331).
- EPS (diluted): $1.40.
Profitability dynamics and per-share metrics:
- YoY profitability declined: net income down 21.9% YoY and EPS down 21.8% YoY, while QoQ EPS rose ~45.8% (reflecting base effects and quarterly seasonality).
- EBITDA: $404.3M; EBITDA margin 6.89% (0.0689).
Cash flow and liquidity:
- Operating cash flow: -$40.8M; free cash flow: -$160.7M.
- Change in working capital: -$359.0M; other working capital effects: -$359.0M; cash flow drivers indicate working-capital headwinds in QQ1 2025.
- Capital expenditures: -$119.8M; acquisitions net: -$74.1M; dividends paid: -$134.4M; net cash provided by financing activities: +$128.7M.
- End of period cash: $420.4M; net debt: $5.6818B; total debt: $6.1023B.
Balance sheet health and leverage:
- Total assets: $19.817B; total liabilities: $15.353B; total stockholders’ equity: $4.450B.
- Current assets: $10.214B; current liabilities: $8.885B; current ratio: 1.15; quick ratio: 0.516; cash ratio: 0.0473.
- Long-term debt: $5.288B; total debt: $6.102B; debt-to-equity: 1.37; debt ratio: 0.308; interest coverage: 9.21x.
- ROE: 4.37%; ROA: 0.98%; ROCE: 3.13%.
Valuation posture versus peers (selected U.S.-listed and European comparables):
- P/E (trailing/forward context not provided): Genuine Parts at ~21.3x. Peer group data shows ranges from approximately 19.6x to 31.6x; GPC sits mid-pack in this peer set, offering balance between growth potential and leverage risk.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.87B
1.43%
1.66%
Gross Profit
2.17B
4.77%
5.00%
Operating Income
342.72M
-14.94%
37.65%
Net Income
194.39M
-21.90%
46.10%
EPS
1.40
-21.79%
45.83%
Key Financial Ratios
currentRatio
1.15
grossProfitMargin
37.1%
operatingProfitMargin
5.84%
netProfitMargin
3.31%
returnOnAssets
0.98%
returnOnEquity
4.37%
debtEquityRatio
1.37
operatingCashFlowPerShare
$-0.29
freeCashFlowPerShare
$-1.16
dividendPayoutRatio
69.1%
priceToBookRatio
3.72
priceEarningsRatio
21.26
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Note: No earnings-call transcript was provided in the data set. As a result, there are no management quotes or thematic quote-by-theme insights to extract at this time. Once a transcript is available, the highlights can be categorized by themes (strategy, operations, market conditions) with direct quotes and context.
N/A
— N/A
N/A
— N/A
Forward Guidance
Given the absence of explicit forward guidance in the provided data, the outlook is inferred from QQ1 2025 results and industry context. Key considerations for the coming quarters include:
- Margin trajectory: Gross margin remains solid, but EBITDA and net margins face pressure from higher operating expenses and working-capital dynamics. A stabilization or improvement in SG&A discipline could materially affect operating margin.
- Cash flow and deleveraging: Negative operating cash flow and negative free cash flow highlight a need for working-capital optimization and capex efficiency. Achieving positive FCF would be a meaningful upside driver for debt reduction and shareholder returns.
- Demand environment: The automotive aftermarket continues to be cyclical and sensitive to vehicle parc, replacement demand, and fleet activity. An improving macro backdrop or stronger vehicle-replacement trends would support revenue growth and margin resilience.
- Capital allocation: The company’s ability to reduce net debt while sustaining a healthy dividend will be watched, especially given a payout ratio around 69% and a modest dividend yield of ~0.8%. Any shift toward accelerated debt repayment, share buybacks, or selective tuck-in acquisitions would shape the risk/reward profile.
Outlook emphasis: Close attention to debt reduction progress, working-capital efficiency (DIO, DSO, DPO), and cost-control initiatives will determine whether EBITDA and net margins can re-expand toward historically stronger levels. Investors should monitor quarterly cadence for improvements in free cash flow and the leverage trend at the company level.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0IUX.L Focus
37.06%
5.84%
4.37%
21.26%
0L9E.L
29.90%
6.10%
1.02%
31.62%
0R33.L
48.00%
18.70%
2.86%
30.11%
0J8W.L
43.20%
24.80%
21.60%
26.01%
0JQQ.L
5.85%
1.23%
1.33%
19.65%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, Genuine Parts Company presents a balanced but cautious investment case. The QQ1 2025 results show modest top-line growth and durable gross margins, but the company carries a heavy leverage load and negative free-cash-flow for the quarter, underscoring liquidity and deleveraging risks. The stock sits mid-pack relative to peer multiples within the displayed peer set, suggesting a reasonable valuation if deleveraging and free cash flow normalization can be achieved. The key catalysts are: (1) stabilization or improvement in working capital to flip negative FCF into a positive contributor, (2) disciplined capital allocation focused on debt reduction or sustainable shareholder returns, and (3) margin recovery driven by cost controls and potential mix shifts toward higher-margin Industrial Parts. Investors should monitor debt reduction progress, cash conversion cycle dynamics (DSO, DIO, DPO), and any updated guidance from management on outlook, capital allocation, and margin targets. If the company can engineer a meaningful improvement in FCF while maintaining or expanding margins, a constructive to favorable risk-adjusted return profile could emerge; otherwise, the high leverage and working-capital sensitivity pose meaningful downside risk.
Key Investment Factors
Growth Potential
- Momentum in Automotive Parts Group and Industrial Parts Group with potential for cross-selling in a broader product portfolio.
- International footprint (UK, France, etc.) and potential incremental growth in select markets where Genuine Parts has scale advantages.
- Ongoing efficiency initiatives and procurement optimization could improve gross and operating margins over time.
Profitability Risk
- Elevated leverage (net debt ~$5.68B) and relatively modest interest-coverage given current earnings, exposing the company to rising financing costs and cyclicality.
- Negative free cash flow in QQ1 2025 signaling working-capital and capex intensity; sustained FCF weakness could pressure liquidity and deleverage efforts.
- Working-capital sensitivity (DIO ~137 days, CCC ~190 days) and potential sensitivity to economic downturns affecting auto-parts replacement demand.
- Multinational exposure introduces currency and geopolitical risks that could affect margins and cash flows across regions.
Financial Position
- Solid asset base with total assets of ~$19.8B; liquidity is supported by cash of ~$420M, but net debt remains high.
- Profitability metrics are broadly positive (gross margin ~37.1%, operating margin ~5.8%), yet net margin (~3.3%) reflects high operating and financing costs.
- Payout ratio ~69%, indicating a meaningful dividend commitment but limited cushion for dividend growth absent higher FCF.
SWOT Analysis
Strengths
Extensive distribution network with Automotive Parts Group and Industrial Parts Group segments.
Solid gross margin around 37% and diversified revenue base across automotive and industrial end markets.
Scale advantages and long-standing market position in the automotive aftermarket.
Healthy absolute cash balance and a broad international footprint supporting resilience.
Weaknesses
Elevated leverage (net debt ~$5.68B) and moderate liquidity metrics relative to peer norms.
Negative free cash flow in QQ1 2025 driven by working-capital outflows and capex.
Long working-capital cycle signals sensitivity to macro conditions (DSO, DIO, CCC).
Dependence on cyclical end-markets may amplify earnings volatility.
Opportunities
Growth potential in EV aftermarket and expanding Industrial Parts demand.
Operational improvements through SG&A discipline, procurement savings, and supply-chain optimization.
Selective acquisitions or tuck-in opportunities to broaden product lines and geographies.
Digital/omnichannel initiatives to improve customer acquisition and inventory turnover.
Threats
Cyclicality of automotive aftermarket demand and industrial capital expenditure cycles.
Rising interest rates and ongoing leverage could pressure debt service and cash flow.
Intense competition from global and regional distributors, including online/remote channels.
Currency fluctuations and geopolitical risks across international operations.