Genuine Parts to carve out industrial business; shares fall

By Apratim Sarkar

Feb 17 (Reuters) - Automotive and industrial parts distributor Genuine Parts GPC.N will separate into two independent companies, it said on Tuesday, months after a deal with activist investor Elliott Investment Management.

Shares of the Atlanta-based company slid more than 12%, after forecasting annual profit below Wall Street estimates.

The announcement follows a settlement last year with shareholder Elliott, which agreed to add two new directors to Genuine Parts' board.

Activist investors have been pushing companies to optimize their bloated corporate structures and shed underperforming or non-core divisions over the past few years.

Elliott, one of the world's busiest and largest activist investors, is no stranger to rejigging companies. It has engaged with some of the biggest global companies, including PepsiCo PEP.O and Honeywell HON.O.

Genuine Parts' split, which does not require shareholder approval, is expected to be completed in the first quarter of 2027. Company names, executive teams and the boards for the separated companies would be announced at a later date.

On a post-earnings call, Genuine Parts' executives said the segments already operate with limited shared facilities, and separating automotive and industrial into two public companies would set both up for long-term growth.

Elliott did not immediately respond to a Reuters request for comment.

Founded in 1928, Genuine Parts now has a market value of roughly $20 billion as its Automotive Parts Group distributes replacement parts around the world, primarily under the NAPA brand name.

Its Motion Industries unit supplies advanced engineered components and technical services to manufacturing and industrial customers across the U.S.

INFLATION AND FIRST BRANDS' DRAG

The automotive industry has been marred by inflationary headwinds, coupled with tariffs and a bumpy electric vehicle market, prompting many automakers to rethink their plans.

Genuine Parts expects annual adjusted profit per share between $7.50 and $8.00, compared with analysts' expectations of $8.44, according to data compiled by LSEG.

On an adjusted basis, Genuine Parts earned a quarterly profit per share of $1.55, compared with the consensus estimate of $1.82.

The industry, however, is still reeling from First Brands' Chapter 11 bankruptcy protection last year, which supplied filters, brakes and lighting systems.

Genuine Parts said it shifted to alternative suppliers to navigate the hit and added that it did not expect operational or product disruptions in 2026. It booked roughly $150 million in expected losses related to the incident.