Dividend Aristocrat Genuine Parts To See 12% Future Gain, Says Argus

Argus has raised its estimates and price target on Genuine Parts Company GPC, while reaffirming its Buy rating on the stock.

Analyst Christopher Graja has hiked Genuine Parts target price by $2 to $108, representing a potential gain, including the dividend, about 12 percent from current levels.

S&P 500 Dividend Aristocrats Index Member

Genuine Parts is a member of the S&P 500 Dividend Aristocrats index of companies that has delivered a long record of dividend increases.

"With stock market volatility elevated and with the 10-year Treasury note yielding less than 2 percent, we see continuing investor demand for GPC both as a stand-alone stock and as a member of dividend-focused ETFs, mutual funds and other portfolios," Graja wrote in a note.

Related Link: Genuine Parts Maintains Full-Year Sales Outlook

Looking Ahead

The analyst sees the company to deliver a better performance in 2017 as low gasoline prices would put more vehicles on the road that in turn is a key driver of auto parts sales.

Further, the company's initiatives to improve service and product availability, increase net square footage and to provide a broader product line to industrial parts customers would benefit in the long run.

Looking further ahead, Graja noted that the company should benefit from more moderate currency headwinds and growth across business segments in 2017.

"And while we aren't modeling it, we believe GPC has the financial strength to make a larger acquisition if there is a compelling opportunity," Graja continued.

Expectations, Estimates

For 2016, Graja lowered his 2016 EPS estimate to $4.75 from $4.77. However, the analyst raised his 2017 EPS estimate to $5.18 per share from $5.15, representing approximately 9 percent EPS growth.

"Our long-term earnings growth rate is 7 percent. We could potentially see raising this to 8 percent if it appears that the issues weighing on 2016 earnings appear to be transitory," Graja added.

Genuine Parts closed Friday's trading up 1.13 percent on the day at $99.90.

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