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Advance Auto Parts (AAP) Q4 Earnings: What's in the Cards?

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Advance Auto Parts Inc. (AAP - Free Report) is expected to report fourth-quarter fiscal 2016 results before the market opens on Feb 21.

In the last quarter, the company posted a positive earnings surprise of 0.58%. Let’s see how things are shaping up prior to this announcement.

Advance Auto Parts Inc Price and EPS Surprise

 

Advance Auto Parts Inc Price and EPS Surprise | Advance Auto Parts Inc Quote

Factors to Consider

Advance Auto Parts drives profits through its continued focus on store expansion. During fiscal 2015, the company opened 121 stores. In the first nine months of fiscal 2016, the company opened 48 stores. The increase in store count ensures higher availability of parts to customers, thereby leading to increased sales volume. The company is also focused on sales execution, availability and delivery of products to generate positive comparable sales performance.

Advance Auto Parts has also undertaken cost-reduction initiatives. The company’s selling, general and administrative expenses have been declining. In the first nine months of fiscal 2016, the company saw costs fall to $2.67 billion or 35.7% of sales from $2.79 billion or 36.2% in the prior-year period.

Advance Auto Parts has outperformed the Zacks categorized Retail/Wholesale-Auto Parts industry over the past six months. The company’s shares have gained 2.6% over this period, as against a 0.7% decline recorded by the industry.

Earnings Whispers

Our proven model does not conclusively show that Advance Auto Parts is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Advance Auto Parts’ Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.09. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Advance Auto Parts carries a Zacks Rank #2. Though a Zacks Rank #2 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

Concurrently, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Spartan Motors, Inc. has an Earnings ESP of +50% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Visteon Corporation (VC - Free Report) has an Earnings ESP of +5.93% and a Zacks Rank #3.

WABCO Holdings Inc. has an Earnings ESP of +2.08% and a Zacks Rank #3.

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