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Why Is Advance Auto Parts (AAP) Down 8.5% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Advance Auto Parts Inc (AAP - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Advance Auto Parts Q1 Earnings Miss Estimates, Down Y/Y
Advance Auto Parts reported a 36% decline in adjusted earnings to $1.60 per share in the first quarter of fiscal 2017 (ended Apr 22, 2017) from $2.51 earned in the prior-year quarter. The figure also missed the Zacks Consensus Estimate of $2.12. Adjusted net earnings declined to $118.4 million from $186 million in the first quarter of fiscal 2016.
Revenues declined 3% year over year to $2.89 billion and lagged the Zacks Consensus Estimate of $2.93 billion. The year-over-year decline was primarily due to the comparable store sales (comps) decline of 2.7% which was impacted by the shift in New Year’s Day to the first quarter of 2017 as well as the significant shift of winter-related demand into December. However, growth in Worldpac in the quarter was a minor offset.
Gross profit declined to $1.27 billion in the reported quarter from $1.35 billion a year ago. Gross margin declined to 44% from 45.3% in the prior-year quarter mainly because of investments in the customer, inventory optimization efforts and supply chain expense deleverage due to comps decline.
Adjusted selling, general and administrative (SG&A) expenses totaled $1.07 billion or 36.9% of sales in the quarter under review compared with $1.03 billion or 34.7% in the first quarter of fiscal 2016. The SG&A was in line with the company’s expectations and reflects the incremental customer focused investments and expense deleverage due to comps decline.
Adjusted operating income fell 35% to $204.9 million from $315 million in the prior-year quarter. Adjusted operating margin was 7.1%, down from 10.6% a year ago.
Dividend
On May 16, 2017, Advance Auto Parts’ board of directors declared a regular quarterly dividend of $0.06 per share. The dividend will be paid on Jul 7, 2017, to stockholders on record as of Jun 23, 2017.
Financial Position
Advance Auto Parts had cash and cash equivalents of $126.1 million as of Apr 22, 2017, down from $135.2 million as of Dec 31, 2016. Total long-term debt was $1.07 billion as of Apr 22, 2017 compared with $1.04 billion as of Dec 31, 2016.
For the fiscal first quarter, operating cash flow was $35.1 million compared with $88.4 million in the year-ago period. Cash flow from operating activities in the quarter declined to $35.1 million from $88.5 million in the prior-year period. Capital expenditures amounted to $65.3 million in the quarter compared with $89.1 million a year ago.
Store Update
In the fiscal first quarter, the company’s total store count was 5,059, including 130 Worldpac branches. Advance Auto Parts served roughly 1,250 independently-owned Carquest stores as of that date.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 10.5% due to these changes.
At this time, Advance Auto Parts' stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'D'. The stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We expect below average returns from the stock in the next few months.
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Why Is Advance Auto Parts (AAP) Down 8.5% Since the Last Earnings Report?
It has been about a month since the last earnings report for Advance Auto Parts Inc (AAP - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Advance Auto Parts Q1 Earnings Miss Estimates, Down Y/Y
Advance Auto Parts reported a 36% decline in adjusted earnings to $1.60 per share in the first quarter of fiscal 2017 (ended Apr 22, 2017) from $2.51 earned in the prior-year quarter. The figure also missed the Zacks Consensus Estimate of $2.12. Adjusted net earnings declined to $118.4 million from $186 million in the first quarter of fiscal 2016.
Revenues declined 3% year over year to $2.89 billion and lagged the Zacks Consensus Estimate of $2.93 billion. The year-over-year decline was primarily due to the comparable store sales (comps) decline of 2.7% which was impacted by the shift in New Year’s Day to the first quarter of 2017 as well as the significant shift of winter-related demand into December. However, growth in Worldpac in the quarter was a minor offset.
Gross profit declined to $1.27 billion in the reported quarter from $1.35 billion a year ago. Gross margin declined to 44% from 45.3% in the prior-year quarter mainly because of investments in the customer, inventory optimization efforts and supply chain expense deleverage due to comps decline.
Adjusted selling, general and administrative (SG&A) expenses totaled $1.07 billion or 36.9% of sales in the quarter under review compared with $1.03 billion or 34.7% in the first quarter of fiscal 2016. The SG&A was in line with the company’s expectations and reflects the incremental customer focused investments and expense deleverage due to comps decline.
Adjusted operating income fell 35% to $204.9 million from $315 million in the prior-year quarter. Adjusted operating margin was 7.1%, down from 10.6% a year ago.
Dividend
On May 16, 2017, Advance Auto Parts’ board of directors declared a regular quarterly dividend of $0.06 per share. The dividend will be paid on Jul 7, 2017, to stockholders on record as of Jun 23, 2017.
Financial Position
Advance Auto Parts had cash and cash equivalents of $126.1 million as of Apr 22, 2017, down from $135.2 million as of Dec 31, 2016. Total long-term debt was $1.07 billion as of Apr 22, 2017 compared with $1.04 billion as of Dec 31, 2016.
For the fiscal first quarter, operating cash flow was $35.1 million compared with $88.4 million in the year-ago period. Cash flow from operating activities in the quarter declined to $35.1 million from $88.5 million in the prior-year period. Capital expenditures amounted to $65.3 million in the quarter compared with $89.1 million a year ago.
Store Update
In the fiscal first quarter, the company’s total store count was 5,059, including 130 Worldpac branches. Advance Auto Parts served roughly 1,250 independently-owned Carquest stores as of that date.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 10.5% due to these changes.
Advance Auto Parts Inc Price and Consensus
Advance Auto Parts Inc Price and Consensus | Advance Auto Parts Inc Quote
VGM Scores
At this time, Advance Auto Parts' stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'D'. The stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We expect below average returns from the stock in the next few months.