Why Genuine Parts Company Stock Fell 10%

What happened

Shares of automotive and industrial replacement parts company Genuine Parts (NYSE: GPC) fell as much as 10.1% on Thursday following the company's third-quarter results. The stock finished the trading day down 8.5%.

The Street's pessimistic response to the report likely reflects the company's worse-than-expected earnings. Genuine Parts reported adjusted earnings per share of $1.16, well below analysts' consensus forecast for $1.28. In addition, the company also lowered its guidance for full-year adjusted EPS to a range of $4.55 to $4.60, down from its prior outlook for a range from $4.70 to $4.75.

So what

The company's plans to cut costs and improve profitability didn't go as well as anticipated during its third quarter, as Genuine Parts CEO Paul Donahue admitted the company was "disappointed" with its results.

The quarter's worse-than-anticipated third-quarter profitability was driven by a lower gross margin and higher operating expenses. Genuine Parts' "initiatives to drive margin expansion did not meet our expectations," said Donahue.

Now what

Genuine Parts says it is expediting "corrective action" regarding its plans to increase its gross margin and reduce expenses.

In addition, the company said it is "generating stronger organic sales growth" going into its fourth quarter.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.