It has been about a month since the last earnings report for Advance Auto Parts (AAP Quick QuoteAAP - Free Report) . Shares have lost about 8.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Advance Auto Parts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Advance Auto Misses Q3 Earnings Estimates, Trims Profit & FCF View

Advance Auto reported adjusted earnings of $2.84 per share for third-quarter 2022 (ended Oct 8, 2022), down 11.5% from the year-ago quarter figure. The reported figure also missed the Zacks Consensus Estimate of $3.32 a share. Advance Auto generated net revenues of $2,641.3 million, falling short of the Zacks Consensus Estimate of $2,652 million and inching down 0.8% from the year-ago reported figure.

Comparable same-store declined 0.7%. Adjusted operating income was down 5.8% year over year to $258 million. Adjusted SG&A expenses totaled $989.3 million for third-quarter 2022, up 5.4% year over year.

Financial Position

Advance Auto had cash and cash equivalents of $191.2 million as of Oct 8, 2022 compared with $601.4 million on Jan 1, 2022. Total long-term debt was $1,187.9 million as of Oct 8, 2022, up from $1,034.3 million on Jan 1, 2022. Year to date, net cash provided by operating activities and FCF totaled $483.1 million $149.5 million, respectively.

Dividend & Share Repurchase

AAP’s board declared a cash dividend of $1.50 a share, which would be paid out on Jan 3, 2023 to all common shareholders of record as of Dec 16, 2022.

During the quarter under discussion, AAP repurchased around 0.4 million shares for $75 million at an average price of $168.93 per share. At the end of third-quarter 2022, AAP had $ 1 billion remaining under its share repurchase program.

Store Update

As of Oct 8, 2022, AAP operated 4,747 stores and 313 Worldpac branches in the United States, Canada, Puerto Rico, and U.S. Virgin Islands. It also served 1,335 independently-owned Carquest-branded stores across these locations, in addition to Mexico and various Caribbean Islands.

2022 Guidance

Advance Auto estimates 2022 net sales in the band of $11-$11.2 billion. Comparable store sales are now envisioned to decline up to 1% as against the prior forecast of 1-3% growth. Adjusted operating income margin is envisioned in the range of 9.8-10%. Advance Auto expects 2022 capex to be a minimum of $350 million. The company now targets an FCF of a minimum of $300 million, down from $700 million estimated earlier. Adjusted EPS is now forecast between $12.60 and $12.80, down from the previously guided range of $12.75-$13.25. The auto parts retailer now intends to buy back a maximum of $600 million worth of shares in 2022. It aims to open 125-150 new stores this year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Advance Auto Parts has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Advance Auto Parts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.