Major benchmarks moved lower on Monday, despite the fact that advancing issues outnumbered declining ones on the New York Stock Exchange. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both posted losses.
Today's stock market
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Big tech stocks and semiconductors led the market downward, and the Technology Select Sector SPDR ETF (NYSEMKT:XLK) dropped 1.2%. Crude oil rose above $52 today, and energy stocks continued their recent rally. The SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) jumped 2.9%.
Genuine Parts buys a European auto parts distributor
Shares of automotive and industrial parts distributor Genuine Parts Company jumped 6% after the company announced it was purchasing the second-largest European parts distributor, Alliance Automotive Group (AAG), from company founders and private equity funds in a deal worth $2 billion. AAG has a focus on light vehicle and commercial vehicle replacement parts, while automotive parts comprise about 53% of Genuine Parts' current business.
The deal should provide an immediate boost to Genuine Parts' results. AAG is expected to generate $1.7 billion in revenue this year and could add $0.65 to $0.70 to adjusted earnings per share in 2018, according to the company. Analysts had been expecting Genuine Parts to earn $5.13 per share on sales of $16.5 billion in 2018.
"We are excited to combine with AAG and enter the European markets with critical scale and a leading market position in the automotive aftermarket," said CEO Paul Donahue in the press release.
Genuine Parts has long had a strategy of growth by acquisition, but this buy dwarfs several smaller purchases earlier this year and represents significant international expansion. The market hasn't been too enthusiastic about the stock of this Dividend Aristocrat despite its 3.1% yield, due to worries about competition from the likes of Amazon. But the high-octane boost this acquisition should provide to Genuine Parts' bottom line had investors cheering today.
AZZ steels itself for more challenges ahead
AZZ, maker of galvanized steel and products for the generation and distribution of electrical power, updated its guidance for fiscal 2018 today, sharply lowering estimates for revenue and earnings. Shares fell 7.3%.
Revenue for the fiscal year ending Feb. 28, 2018, is now estimated to be between $825 million and $885 million, 6.6% below previous guidance of $880 million to $950 million at the midpoint. EPS guidance was lowered from a range of $2.60 to $3.10 to a range of $1.80 to $2.30, a 28% reduction.
Company management gave a wide-ranging explanation for the expected shortfall. "Given recent events, we have completed a thorough evaluation of our businesses," said CEO Tom Ferguson in the press release. "We assessed the impact of the recent hurricanes-Harvey and Irma-on our refinery turnaround activity; market conditions in the US nuclear market with the closure of the VC Summer Nuclear Project and the ongoing fallout from the Westinghouse Nuclear bankruptcy; lower than expected electric utility spending in Saudi Arabia; and our current shippable backlog. Based on this evaluation we reduced our full year guidance for fiscal 2018."
Industrial stocks have generally outperformed the broader market indexes this year, but AZZ has seen its stock price cut 26% in 2017 after a string of disappointing quarters. Company management continues to express optimism for a turnaround, but today's announcement seemed to indicate there is still plenty of pain ahead.