“Standard Motor Products, Inc. (SMP), a leading replacement parts manufacturer and distributor, is benefiting from the sluggish economy. During periods of economic weakness, more automobile owners tend to repair their cars rather than purchase new ones. The average age of cars on U.S. roads exceeds 10 years, up from 8.4 years in 1995. Standard Motor’s engine-management business makes ignition and emission parts, battery cables and fuel-system parts. The temperature-control unit makes air-conditioning and heating parts and engine-cooling systems.
“On October 26, the company acquired Forest Trading, a supplier of engine-management products, for $44 million. Analyst estimates target 2011 earnings per share of $1.44, up 39%. September-quarter earnings per share were $0.59, up 37% and $0.11 above the consensus. Per-share profits have outstripped the consensus in five straight quarters, by an average of $0.10. Revenue rose nearly 4% to $236 million, in line with the consensus. At less than 12 times trailing earnings, shares trade nearly 15% below their five-year average. Based on the 2011 consensus, the P/E is 11, a 40% discount to the median automotive retailer in the S&P 1500 Index. The stock’s Overall score is 90, with a Value score of 75. Standard Motor is being initiated as a Buy.”
Richard J. Moroney, CFA, Upside, 11/7/11
