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Why Is Advance Auto Parts (AAP) Up 1.1% Since Its 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 added about 1.1% in that time frame.

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

Advance Auto Parts Q4 Earnings Top Estimates, Down Y/Y

Advance Auto Parts reported adjusted earnings of 77 cents per share in the fourth quarter of fiscal 2017 (ended Dec 30, 2017), declining from $1 in the prior-year quarter. The figure, however, surpassed the Zacks Consensus Estimate of 65 cents. Adjusted operating income declined to $113.7 million from $125.6 million in the fourth quarter of fiscal 2016.

Advance Auto Parts reported revenues of $2.04 billion, beating the Zacks Consensus Estimate of $2.02 billion. Revenues were 2.2% lower than the year-ago quarter. During the quarter, comparable store sales were down 2.6% year over year.

Gross profit declined to $873.6 million in the reported quarter from $907.6 million a year ago. Gross margin declined 69 basis points year over year to 42.9%.

Adjusted selling, general and administrative (SG&A) expenses totaled $759.9 million or 37.3% of sales compared with $781.9 million or 37.5% of sales in the year-ago period.

In 2017, earnings came in at $5.37, lower than the 2016 figure of $7.15 per share. In 2017, total revenues also decreased to $9.37 billion from $9.57 billion in 2016.

Financial Position

Advance Auto Parts had cash and cash equivalents of $546.9 million as of Dec 30, 2017, up from $135.2 million as of Dec 31, 2016. Total long-term debt was $1.04 billion as of Dec 30, 2017, almost unchanged from the figure released on Dec 31, 2016.

In 2017, operating cash flow was $600.8 million compared with $523.3 million in 2016.

Store Update

As of Dec 30, 2017, Advance Auto Parts operated 5,074 stores and 129 Worldpac branches and served approximately 1,218 independently-owned Carquest stores.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to three lower.

VGM Scores

At this time, AAP has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Zacks style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

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


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