Genuine Parts Q4 Earnings Call Highlights
Genuine Parts NYSE: GPC used its fourth-quarter 2025 earnings call to outline plans for a major corporate restructuring while also detailing results that management said came in below expectations due to a late-year sales shortfall in Europe and weaker purchases by U.S. independent owners.
Planned separation into two public companies
Chair-elect and CEO Will Stengel said the company intends to separate into two independent, publicly traded companies: a pure-play global automotive aftermarket business anchored by the NAPA brand, and a standalone global industrial distribution business built around Motion.
Stengel said the company’s 2025 strategic and operational review concluded a separation is “the best path forward” to unlock value, improve focus, and provide tailored capital allocation strategies for each business. Management emphasized that the automotive and industrial operations already run largely independently, with no shared customer-facing roles and limited shared facilities, though some IT, sourcing, and back-office functions will need to be transitioned.
The separation is planned to be tax-free to shareholders and is targeted for completion in the first quarter of 2027, subject to customary approvals. The company also said it expects to hold investor days for each business in the second half of 2026. Management said initial estimates of separation dis-synergy costs are “manageable,” but did not provide figures.
Stengel described the future automotive company as competing in an over $200 billion addressable market, supported by an aging vehicle parc in its markets, while the Motion-led industrial company would operate in a fragmented $150 billion global market. Both businesses are targeting investment-grade credit ratings, according to management.
2025 results: growth and margin gains, but below expectations
Stengel said 2025 was shaped by tariffs, global trade policy shifts, interest rates, and a cautious consumer. Total company sales were $24.3 billion, up 3.5% year over year. He cited a third consecutive year of gross margin expansion driven by pricing, sourcing, and acquisitions, and said restructuring and cost actions delivered about $175 million of benefit in 2025, above the company’s expected range of $110 million to $135 million.
GPC invested about $470 million during the year, primarily in supply chain and technology, and returned more than $560 million to shareholders via dividends. The board approved a 3.2% dividend increase, marking the 70th consecutive year of dividend increases.
Still, management said results fell short of expectations largely because fourth-quarter sales were weaker than forecast, particularly in Europe and among U.S. independent owners. The company also announced a reporting change for the automotive business, moving to three segments: North America Automotive, International Automotive, and Industrial.
Segment performance: industrial steady, automotive mixed by geography and channel
Industrial (Motion) posted 2025 sales of $8.9 billion, up about 2%, with comparable sales up 1.5%. Management pointed to broad end-market exposure and customer service execution despite a sluggish industrial environment, noting PMI was below 50 for the last 10 months of the year. Industrial segment EBITDA was about $1.1 billion, or 12.9% of sales, up 30 basis points year over year. The company said e-commerce penetration rose more than 800 basis points to about 45% of Motion sales.
North America Automotive sales increased about 3% for the year, with comparable sales up about 0.5%. Segment EBITDA was $672 million, or 7.1% of sales, down 70 basis points year over year, reflecting cost inflation in wages, healthcare, rent, and freight, partially offset by restructuring actions. In the U.S., company-owned stores were a bright spot, with comparable sales up about 2.5% for the year and about 4% in the second half, while purchases by independent owners declined about 1%. Comparable sales to commercial customers rose about 2%, while retail comparable sales fell about 4%.
International Automotive sales rose about 5% in 2025, with comparable sales slightly positive. Segment EBITDA was $544 million, or 9.3% of sales, down 90 basis points on similar cost pressures. In Europe, comparable sales were down about 2% and management said conditions moderated in the second half, prompting actions such as closing underperforming locations, consolidating distribution centers, and reducing headcount and overhead. By contrast, Asia Pacific delivered double-digit growth in local currency; total sales increased about 10% with comparable sales up about 5%, and the Two-Wheel division grew sales 20%.
Q4: adjusted EPS pressured by sales shortfall; significant one-time charges recorded
CFO Bert Nappier said fourth-quarter sales rose 4.1% and adjusted gross margin expanded 70 basis points, but adjusted EPS of $1.55 was below the prior year. He attributed the miss versus internal expectations to weaker-than-anticipated sales in Europe and flat comparable sales to U.S. independent owners. Management estimated each of those factors had roughly a $0.10 negative impact on the quarter relative to its initial view.
Nappier said the quarter included $1.1 billion of pre-tax adjustments (or $825 million after tax), including:
- A $742 million non-cash pension settlement charge tied to the termination of the U.S. pension plan, completed in December
- A ~$150 million charge for expected losses tied to amounts due from First Brands Group following its bankruptcy filing
- A $103 million increase in the asbestos product liability reserve due to higher frequency and severity of claims
- $87 million of restructuring costs in the quarter
- $30 million of accounting adjustment charges, largely related to asset retirement obligations
On a consolidated basis, adjusted gross margin was 37.6%. Adjusted SG&A was 29.7% of sales, up 30 basis points. Nappier also said the company realized about $175 million of restructuring savings in 2025 (about $0.95 per share) on roughly $255 million of restructuring costs.
For 2025 cash flow, GPC generated about $890 million in operating cash flow and $421 million of free cash flow. Capital expenditures totaled about $470 million, and M&A investment was about $320 million, highlighted by the Benson Auto Parts acquisition in Canada.
2026 outlook: sales growth of 3% to 5.5% and adjusted EPS of $7.50 to $8.00
Management guided to 2026 diluted EPS (including transformation expenses) of $6.10 to $6.60 and adjusted EPS of $7.50 to $8.00, which would be up 5% at the midpoint versus 2025 adjusted EPS of $7.37. The company expects total sales growth of 3% to 5.5%, assuming roughly flat underlying market growth, about 2% pricing benefit (including tariffs), and contributions from M&A and foreign exchange.
Segment sales growth expectations were:
- North America Automotive: 3% to 5% (comps 1.5% to 3.5%)
- International Automotive: 3% to 6% (comps 1.5% to 3.5%)
- Industrial: 3% to 6% (comps 3% to 6%)
GPC expects 40 to 60 basis points of adjusted gross margin expansion, but anticipates adjusted SG&A deleverage of 30 to 50 basis points due to continued cost inflation, including high single-digit U.S. healthcare inflation and mandatory pay increases in some international markets. Transformation and cost actions are expected to total $225 million to $250 million of expense, with $100 million to $125 million of anticipated benefit; these figures exclude separation costs.
Nappier said the company expects 2026 adjusted EBITDA of $2.0 billion to $2.2 billion, with segment EBITDA outlooks of $700 million to $730 million for North America Automotive, $560 million to $600 million for International Automotive, and $1.2 billion to $1.3 billion for Industrial. Depreciation and interest expense are expected to be a combined headwind of about $0.30 to EPS, with depreciation and amortization guided to $515 million to $540 million and interest expense to $180 million to $190 million.
On early 2026 trends, management said January sales were strong on an average selling day basis, led by Motion, and noted January PMI was above 50 for the first time since February 2025. However, Europe remained a “watch point,” and the company said it does not expect European market conditions to improve through the first quarter from late-2025 levels.
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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