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    GPC
    Earnings call· Jun 2026(Q2 FY26)

    GENUINE PARTS CO GPC

    Jul 21, 2026 Source

    Executive summary

    Genuine Parts Company Q2 FY26 — Strong Performance and Separation Progress

    Genuine Parts Company delivered a strong second quarter, exceeding internal expectations despite a dynamic global macro environment and the ongoing Iran conflict. The company is making significant progress towards the planned separation of its automotive and industrial businesses in Q1 2027, with key milestones achieved and Investor Days planned for December. Management reaffirmed its full-year adjusted EPS guidance, balancing first-half outperformance with a more prudent outlook for Global Automotive in the second half.

    Highlights

    5

    • Total GPC sales increased by approximately $400 million, up 6% compared to Q2 2025.

    • Adjusted gross margin expanded by 20 basis points, driven by strategic pricing and sourcing initiatives.

    • Industrial segment EBITDA grew approximately 10% year-over-year, reaching $316 million.

    • Adjusted EPS was $2.15, up from $2.10 in the prior year, exceeding internal plans.

    • Company-owned store sales growth improved sequentially to 4% in Q2, demonstrating successful initiatives.

    Concerns

    5

    • Iran conflict resulted in an estimated $16 million negative impact to EBITDA in Q2, primarily affecting automotive.

    • North America Automotive experienced a cautious consumer backdrop and persistent inflation, with June sales roughly flat due to higher fuel prices.

    • International Automotive EBITDA margin decreased by 20 basis points due to inflationary cost pressures from higher salaries, wages, rent, and freight.

    • Lowered revenue outlook for Global Automotive by approximately 0.5 percentage point for the remainder of the year due to moderating demand from higher energy prices.

    • Expects $20 million to $30 million of incremental operating expenses for the remainder of the year due to the Iran conflict.

    Guidance & targets

    8
    CategoryTargetConfidence
    Adjusted diluted earnings per share
    $7.50 to $8.00
    high materiality
    High
    Diluted earnings per share
    $5.90 to $6.40
    high materiality
    High
    Total GPC sales growth
    3% to 5.5%
    high materiality
    High
    Global Automotive revenue outlook
    lowered by approximately 0.5 percentage point
    medium materiality
    Medium
    Incremental operating expenses from Iran conflict
    $20 million to $30 million
    medium materiality
    High
    Transformation activities and cost actions expenses
    $225 million to $250 million
    low materiality
    High
    Transformation activities and cost actions benefit
    $100 million to $125 million
    low materiality
    High
    Depreciation and interest expense impact
    approximately $0.30
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Industrial
    Motion delivered excellent quarter with balanced growth across large corporate accounts, small-to-medium sized local customers, and value-add solutions. Growth in 11 of 14 end markets, notably equipment and machinery and food products. Deferred maintenance normalizing, larger capital investment projects improving.
    Comparable sales: 6%Price inflation benefit: 2.5%EBITDA margin: 13.1%MRO business sales growth: 7%Project-based demand sales growth: 9%
    		$2.4 billion7%—$316 million
    North America Automotive
    Navigating cautious consumer backdrop and persistent inflation. Relative strength in nondiscretionary repair and maintenance and service categories (85% of U.S. business). Discretionary categories improved to low single-digit growth. Canada sales up 9% local currency, comparable sales up 1%.
    Comparable sales: 2.6%EBITDA margin: 8.2%U.S. total sales growth: 3%U.S. comparable sales growth: 3%U.S. price contribution: 2.5%Company-owned stores comparable sales growth: 4%Commercial comparable sales growth (company-owned stores): 5.5%Independent same-store purchases growth: 1.5%NAPA system sales growth: 3%Commercial customers comparable sales growth (NAPA system): 4%Retail customers comparable sales decrease (NAPA system): 3%
    		—4%—$208 million
    International Automotive
    EBITDA margin decrease predominantly driven by inflationary cost pressures (salaries, wages, rent, freight), partially offset by restructuring. Europe saw notable improvement in U.K. and Germany. Asia Pacific had solid quarter despite challenging market conditions (Iran conflict, interest rate increases, low consumer sentiment in Australia).
    Comparable sales: 1%EBITDA margin: 9.4%Europe total sales growth (local currency): 4%Europe comparable sales growth: 1%Asia Pacific total sales growth (local currency): 2%Asia Pacific comparable sales growth: 1%
    		—8%—$150 million

    Operational metrics

    25
    Total GPC sales growth
    6%vs Q2 FY25
    Q2 FY26
    Comparable sales improvement
    340vs prior year
    Q2 FY26

    Each of the three segments delivered comparable sales growth that sequentially improved from the prior quarter.

    Acquisitions benefit to sales
    120vs prior year
    Q2 FY26
    Foreign currency benefit to sales
    140vs prior year
    Q2 FY26
    Price inflation benefit to sales
    low single-digit
    Q2 FY26
    Adjusted SG&A as % of sales
    29.1%up 40 bps from prior year
    Q2 FY26

    Core SG&A growth driven by higher costs in healthcare, freight, and rent.

    U.S. healthcare expenses growth
    15%up
    Q2 FY26

    Part of core SG&A growth.

    Freight and rent expenses growth
    mid-single digitsup
    Q2 FY26

    Part of core SG&A growth, outsized pressure from Iran conflict.

    People-related costs as % of sales
    roughly flatvs prior year
    Q2 FY26

    Testament to restructuring initiatives and cost actions.

    Restructuring costs incurred
    $134 million
    YTD FY26

    Excluded from adjusted results.

    Cost savings realized
    $55 million
    YTD FY26

    From restructuring initiatives and cost actions.

    Iran conflict negative EBITDA impact
    $16 millionin line with expectations
    Q2 FY26

    Primarily from higher operating expenses.

    Adjusted total EBITDA growth
    4%vs prior year
    Q2 FY26
    Adjusted total EBITDA margin
    8.7%down 20 bps year-over-year
    Q2 FY26
    Net working capital improvement
    $260 million
    YTD FY26

    Contributed to cash flow from operations.

    Capital expenditures
    $205 million
    H1 FY26

    Includes investment in two state-of-the-art distribution centers at NAPA expected to go live end of year.

    Dividends paid to shareholders
    $288 million
    H1 FY26

    Part of capital returns.

    Corporate costs
    $360 million
    FY25

    Baseline for allocation during separation.

    Corporate costs allocated to Global Automotive
    $210 million to $230 million
    Post-separation

    Estimated allocation of GPC's current corporate costs.

    Dis-synergies for Global Automotive
    $25 million to $40 million
    Post-separation

    Expected post-separation, company aims for low end of range.

    Pro forma Global Automotive additional costs
    $250 million
    Post-separation

    Estimated targeted level of cost for year 1 post-separation.

    Corporate resources to support Global Industrial
    $50 million to $75 million
    Post-separation

    These corporate costs will fund the previously disclosed stand-alone costs for Motion as a public company.

    Dis-synergies for Global Industrial
    $25 million to $40 million
    Post-separation

    Previously disclosed.

    Pro forma Global Industrial additional costs
    $100 million
    Post-separation

    Estimated targeted level of cost for year 1 post-separation.

    Financing fees (AR program)
    $50 million
    Annual

    Associated with accounts receivable program, remains under review as part of capital structure work stream.

    Industry KPIs

    5
    MetricValueDetails
    EPS$2.15USD
    Revenue$6.5 billionUSD
    Gross margin37.9%%
    Sg a OPEX ratio29.1%%
    Adjusted EBITDA ebita8.7%%

    Deals & partnerships

    2
    BensonAcquisition in Canada

    Provides tailwind for Canadian business, ahead of financial and operational targets.

    —Accretive bolt-on acquisitions

    Add local service density and growth in priority geographies in Europe.

    Risks & headwinds

    6
    Dynamic global macro environmentcurrent

    Mitigation: focused teamwork and disciplined execution; controlling what we can control

    Iran conflictongoing

    $16 million negative impact to EBITDA in Q2 (primarily automotive); $20 million to $30 million incremental operating costs for H2 FY26

    Mitigation: factored into updated guidance; managing cost increases with suppliers; passing through costs

    Persistent inflationary environmentongoing

    higher product costs; U.S. healthcare expenses up 15%; freight and rent expenses up mid-single digits; mandatory minimum wage increases (International Auto)

    Mitigation: strategic pricing and sourcing initiatives; restructuring initiatives and cost actions; working with suppliers to manage increases; passing through costs

    Cautious consumer backdropongoing

    June sales roughly flat (North America Auto); retail customers comparable sales decreased 3% (NAPA system); Global Automotive revenue outlook lowered by 0.5 percentage point for H2 FY26

    Mitigation: navigating with strategic priorities; prudent view for Global Automotive in H2

    Softer market conditionsongoing

    softer demand in pulp and paper, lumber and wood, and rubber and plastics (Industrial); ongoing softer market conditions in Canada; challenging market conditions in Asia Pacific (Australia)

    Mitigation: Motion's scale, value proposition, operating discipline; Canadian team executing well; Asia Pacific team focused on winning profitable market share

    Interest rate increases and low consumer sentimentcurrent

    3 interest rate increases this year; 30-year record low consumer sentiment (Australia)

    Mitigation: Asia Pacific team focused, motivated, executing at high level; investing in supply chain

    What to watch in Q3 FY26

    5

    Separation progress (Form 10 filing)

    later this summer
    CurrentStand-alone audit completed
    TargetConfidential Form 10 filing with SEC

    Why it matters

    This is a key regulatory milestone for the planned separation of automotive and industrial businesses, impacting future value creation.

    The work for the stand-alone audit has now been completed, which is an important step in preparing each company to operate independently and provides the foundation for other important near-term work. We also expect to confidentially file the Form 10 with the SEC later this summer.

    Q&A highlights

    7

    Will back-half inflation be similar to the first half's 2% or higher/lower, considering the Iran conflict and pass-through capabilities?

    Management expects top-line inflation to remain around 2% for the full year, with low single-digit impact on SG&A and COGS. They are factoring in higher freight and fuel costs from the Iran conflict but expect to pass through most cost increases.

    “On the top line, it's going to run right around that 2% as we've said for the full year. The Iran conflict might have given us a little bit more lift in the second half. We didn't really model that into our updated guidance.”

    asked by Gregory Melich · answered by Herbert Nappier

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Separation Update

    Genuine Parts Company is on track to separate its global automotive and industrial businesses into two independent public companies by Q1 2027. The company has completed the stand-alone audit and expects to confidentially file Form 10 with the SEC later this summer, advancing regulatory work. Investor Days for both companies are anticipated in early December in New York to provide comprehensive views on strategy, financial profiles, and capital allocation.

    02

    Corporate Cost Allocation for Separation

    The company has analyzed the allocation of its 2025 corporate costs ($360 million) for the separation. Approximately $210 million to $230 million is estimated to be allocated to the global automotive business, including $20 million for asbestos litigation. Post-separation, global automotive is expected to incur an additional $25 million to $40 million in dis-synergies, totaling an estimated $250 million in pro forma costs.

    03

    Industrial Business Cost Allocation and Performance

    For the global industrial business, $50 million to $75 million of corporate resources will support its stand-alone operations, funding previously disclosed stand-alone costs. Combined with $25 million to $40 million in dis-synergies, the pro forma global industrial business is expected to incur an additional $100 million in costs. The Industrial segment delivered strong Q2 results with 7% sales growth and 10% EBITDA growth, driven by balanced growth across customer types and end markets, with deferred maintenance normalizing and capital projects improving.

    04

    North America Automotive Performance and Initiatives

    North America Automotive sales increased 4% with comparable sales up 2.6%, navigating a cautious consumer backdrop and persistent inflation. The NAPA system delivered 3% sales growth, with commercial customers up 4% and retail down 3%. The company is applying its successful playbook from company-owned stores to independent owners, using data analytics to quartile owners and design solutions for sales excellence, pricing, inventory, operations, and technology, aiming to drive performance optimization.

    05

    International Automotive and Asia Pacific Highlights

    International Automotive sales increased 8% with comparable sales up 1%. Europe saw sequential improvement, particularly in the U.K. and Germany, driven by key account strength and NAPA offerings, supported by infrastructure investments. Asia Pacific, despite challenging market conditions including interest rate increases and low consumer sentiment in Australia, achieved 2% local currency sales growth and 1% comparable sales growth, with the Repco business named Australia's 2026 Major Retailer of the Year.

    06

    Iran Conflict Impact and Mitigation

    The ongoing Iran conflict is a significant factor, contributing to a $16 million negative EBITDA impact in Q2, primarily in automotive, and is expected to add $20 million to $30 million in incremental operating expenses for H2 FY26 due to higher freight and fuel costs. Management has lowered the Global Automotive revenue outlook by 0.5 percentage point for the remainder of the year due to weakening consumer sentiment from higher energy prices, but expects to pass through many cost increases to maintain gross margin expectations.

    AI-generated summary of the company’s earnings call. Not investment advice.