Critical Review: Lear (LEA) vs. Genuine Parts (GPC)

Lear (NYSE: LEA) and Genuine Parts (NYSE:GPC) are both large-cap auto/tires/trucks companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, risk, dividends, valuation, earnings, analyst recommendations and profitability.

Institutional and Insider Ownership

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95.8% of Lear shares are held by institutional investors. Comparatively, 75.3% of Genuine Parts shares are held by institutional investors. 0.5% of Lear shares are held by company insiders. Comparatively, 3.1% of Genuine Parts shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Lear and Genuine Parts’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lear $20.47 billion 0.62 $1.31 billion $17.00 11.13
Genuine Parts $16.31 billion 0.80 $616.75 million $4.64 19.24

Lear has higher revenue and earnings than Genuine Parts. Lear is trading at a lower price-to-earnings ratio than Genuine Parts, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations for Lear and Genuine Parts, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lear 1 6 9 0 2.50
Genuine Parts 3 4 1 0 1.75

Lear presently has a consensus target price of $194.75, suggesting a potential upside of 2.93%. Genuine Parts has a consensus target price of $95.33, suggesting a potential upside of 6.80%. Given Genuine Parts’ higher probable upside, analysts clearly believe Genuine Parts is more favorable than Lear.

Dividends

Lear pays an annual dividend of $2.80 per share and has a dividend yield of 1.5%. Genuine Parts pays an annual dividend of $2.88 per share and has a dividend yield of 3.2%. Lear pays out 16.5% of its earnings in the form of a dividend. Genuine Parts pays out 62.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lear has raised its dividend for 7 consecutive years and Genuine Parts has raised its dividend for 61 consecutive years. Genuine Parts is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Lear and Genuine Parts’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lear 6.42% 30.32% 10.35%
Genuine Parts 3.78% 20.48% 6.77%

Risk & Volatility

Lear has a beta of 1.45, meaning that its share price is 45% more volatile than the S&P 500. Comparatively, Genuine Parts has a beta of 1.16, meaning that its share price is 16% more volatile than the S&P 500.

Summary

Lear beats Genuine Parts on 11 of the 17 factors compared between the two stocks.

About Lear

Lear Corporation designs, develops, engineers, manufactures, assembles, and supplies automotive seating, and electrical distribution systems and related components primarily to automotive original equipment manufacturers worldwide. The company operates through Seating and E-Systems segments. The Seating segment includes seat systems and related components, such as leather and fabric products, seat trim covers, recliner mechanisms, seat tracks, seat structures and mechanisms, seat foams, and headrests primarily for automobiles and light trucks, compact cars, and sport utility vehicles, as well as thermoelectric seat heating and cooling systems. The E-Systems segment offers electrical distribution systems that route electrical signals and manage electrical power within the vehicle for traditional vehicle architectures, as well as high power and hybrid electric systems. This segment's products include wire harnesses, terminals and connectors, and junction boxes; and electronic control modules, such as body control modules, smart junction boxes, gateway modules, wireless control modules, lighting control modules and audio domain controllers, and amplifiers, as well as associated software. It also offers wireless systems comprising passive entry, remote keyless entry, and dual range/dual function remote keyless entry systems. The company was founded in 1917 and is headquartered in Southfield, Michigan.

About Genuine Parts

Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company’s segments include Automotive, Industrial, Office Products Group, Electrical/Electronic Materials and Other. The automotive segment distributes replacement parts for all makes and models of automobiles, trucks and other vehicles. The industrial segment distributes a range of industrial bearings, mechanical and fluid power transmission equipment, including hydraulic and pneumatic products, material handling components and related parts and supplies. The office products segment distributes a range of office products, computer supplies, office furniture, and business electronics. The electrical/electronic materials segment distributes a range of electrical/electronic materials, including insulating and conductive materials for use in electronic and electrical apparatus.

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