Your Source for Up-To-Date News and Research on the Collision Repair Industry
click here to subscribe to the FREE INSIGHT Editor's Desk News Alert Email
SUBSCRIBERS-ONLY
Today's News
INSIGHT This Month
INSIGHT Archives
Survey Center
Letter to the Editor
Business Tools
Subscription Information
CSI Reporting
Financial Analysis
IRS Audit Guide
Management/
Technical Info
1998 Market Watch Rates
INSIGHT Inside this month's issue...
Feedback
Letter to the Editor
This article originally appeared in the March, 2000 Issue of INSIGHT
March 2000 Investment Update
The concept is slick and the players are now the biggest players at the OE dealer level, the insurer level, and the shop level.
ADP and Reynolds and Reynolds probably have 80+ percent of the dealer systems market, and, most importantly, have access to more complete and comprehensive parts databases that will truly allow complete and accurate parts orders to be placed with dealers, unlike the collision estimating parts databases of Mitchell, MOTOR, and the collision center operations at ADP.
This new company will place a lot of pressure on Carstation.com to come up with a parts database to compete, which will be very tough to find. Perhaps Bell and Howell and Carstation will do a deal, but I doubt it, based on Bell and Howell’s current relationship with both the OEs and ADP.
Parts ordering will undoubtedly move to a higher level of automation, tying the shop, parts provider, and potentially the insurer into one network, but it will take far longer to accomplish this than recent press releases would indicate.
On another front, First Priority’s news releases not only puff the size of our industry from our reported $25.6 billion to over $30 billion, but also talk about how their new website, Drivershield, tied to their 2,400+ contracted shops will soon be a major provider in both claims handling automation and in the direct repair business as well.
This was all a bit much for me, so I sold out my FPGP stockholding, wishing them well, but putting my money in more conservative and less PR-founded companies.
An example is Keystone, where, although profits for the last quarter tanked, sales were up slightly, primarily on non-crash-related parts and supplies.
Keystone now sells at less than a reported five times earnings. Cost reduction, coupled with new product introduction will be the key to successful profitability this year, as acquisitions halt and insurers pull back from calling for the use of aftermarket parts.
It is my feeling that Keystone will continue to expand its product coverage, perhaps offering some crash-related parts now considered captive by OEs but produced by non-captive companies. All in all, I think Keystone’s net future year earnings will show a rebound from the last quarter, perhaps coming in at .75 to .80, which, if we apply a PE ratio typical for the parts wholesale industry of eight to ten times, should move Keystone stock back to a level closer to its levels in 1998 - 1999, before the State Farm case.
The only paint-related company on an uptick for the year is Sherwin-Williams, which is coming back from a multi-year low of less than $17 per share, down from a high in the high thirties. Sherwin-Williams, from an automotive refinish perspective has pushed hard to develop its position with consolidators, starting with ABRA, and now enjoying volume with several others. Owning its own distribution, in some respects a double-edged sword, has given Sherwin-Williams a strong hand in controlling both pricing and service levels.
On the subject of consolidators, the Boyd Group, almost alone, is continuing an aggressive program of acquisitions, the latest in Oklahoma. The other consolidators are either concentrating on what they have or making Greenfield investments to achieve potentially lower operating costs. Sterling recently opened three new operations based on this concept.
As we move forward into the new Millennium, not only will we see additional consolidators beyond Boyd as publicly held companies, but we will see new investment opportunity as represented by the dot com entrants into parts sourcing.
-Charles Baker-
Feedback
Have a comment about this article? Send Email to Charles Baker, INSIGHT's Publisher
©2000 Collision Repair Industry INSIGHT
All Rights Reserved
FEATURED
LINKS:
