Moody's Ratings affirmed Genuine Parts Company's (GPC) Baa1 long-term issuer rating. However, the agency changed the company's outlook to negative from stable. This revision stems from weaker than anticipated operating performance.
The weaker performance is driven by challenging market conditions, cost pressures, and economic uncertainty. These factors have softened consumer demand at NAPA affiliates. Furthermore, weakness in the U.S. manufacturing sector negatively impacted sales to GPC's industrial customers.
Moody's expects GPC's key financial metrics to remain largely unchanged over the next year. This includes a lease-adjusted debt/EBITDA ratio of 3.5x. Genuine Parts is implementing a global restructuring program to enhance efficiency, but Moody's views the timing for a significant performance rebound as uncertain.
The rating agency also highlighted GPC's reliance on a large supply chain finance program. Moody's views this program as a potential risk should credit conditions tighten.