November 3, 2008 - Genuine Parts Co. (GPC-NYSE) engages in the distribution of automotive and industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, and Mexico. The company operates through four groups: Automotive Parts Group, Industrial Parts Group, Office Products Group, and Electrical/Electronic Materials Group.

The Industrial Parts Group offers various industrial bearings; mechanical power transmission equipment; industrial automation; hose, hydraulic, and pneumatic components; and industrial products and material handling products. Its products include hoses, belts, bearings, pulleys, pumps, valves, chains, gears, sprockets, speed reducers, and electric motors. This segment's customers consist of automotive, chemical, food, forest product, metal, paper, mining, petrochemical, and pharmaceutical manufacturers.

The Office Products Group distributes computer supplies, office furniture, office machines,general office supplies, school supplies, healthcare products, janitorial supplies, and breakroom supplies.

The Electrical/Electronic Materials Group offers magnet wire, conductive materials, insulating and shielding materials, assembly tools, test equipment, adhesives and chemicals, pressure sensitive tapes, solder, anti-static products, and thermal management products to electrical and electronic manufacturers.The company was founded in 1928 and is headquartered in Atlanta,Georgia.

Here's the scoop on Genuine Parts as told in an interview in Barron's with John Casesa, a former research analyst specializing in the auto industry and now the managing partner at Casesa, Shapiro Group: "It is a parts wholesaler, selling to the "do it for me" market, namely mechanics. NAPA Auto Parts is the brand that they are famous for; they have about 6,000 NAPA stores in the U.S. Genuine's business is driven by the total number of cars on the road. It has paid a dividend every year since it went public in 1948; it has an outstanding balance sheet and an extremely stable revenue line and the No. 1 franchise in a business that is not going away. Cars may change, and trucks may change, and they will use different parts. But they are still going to use parts. What Genuine does is get any one of those 375,000 parts to a mechanic anywhere in the United States within 24 hours. The stock is yielding about 4.6% (now 4.2%). In a brutal recession in the auto business, Genuine Parts just reported slightly up earnings. It is a highly defensive name."

Highly defensive, better earnings, good yield. It would seem to be the kind of stock made for today's volatile market. Of the 9 analysts covering the stock, the consensus is for earnings to be $3.14 this year (up from $2.98 last year). Next year, consensus is for $3.28. For the fourth quarter of this year, expect 76 cents, up slightly from 75 cents last year in the same quarter. Over the last 5 years, annual average growth for earnings was 9.6%. For the next 5, analysts see 8.2%.

While known as an auto replacement company, its other divisions are beginning to contribute nicely as it tries to diversify revenues. In the June quarter, the Electrical group saw sales increase by 11% and the Industrial dvision grew by 7% on the top line. The other two sectors, auto and office products slowed in the period.

However, the auto group won't be lagging long. With the current economic climate and tighter credit concerns, conumers will most likely hold on to cars longer. That means more sales for GPC in the coming years as older cars require more and more replacement parts.

More numbers: Annual revenues were $10.5 billion in 2006, then $10.84 billion in 2007. This year analysts predict $11.250 and next year $11.675 billion. Market cap is $6.3 billion. Price to Book is 2.29. Profit margin was 4.62% in the last 12 months along with an Operation margin of 7.63%. Return on equity is a very respectable 19.1%. There's $124.4 million in cash on the books. Insiders own 5.2% of the shares with 161 million outstanding. Beta is .76. The annual dividend is $1.56.

With a relatively low P/E of 12.5, this stock is trading at an attractive valuation compared to the last 5 years when the P/E ranged from 15.6 to 17.4. In fact, it's the lowest P/E since 2000 when the average for the year was 10. With a 4.2% yield, relatively low P/E and strong balance sheet, this is a good defensive stock that deserves more investigation by investors looking for less volatility in their portfolios.

- Company Web site: www.genpt.com

- Ted Allrich