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Advance Auto Parts (AAP) to Post Q4 Earnings: What's in Store?

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Advance Auto Parts, Inc. (AAP - Free Report) is set to report fourth-quarter and 2018 results before the opening bell on Feb 19.

In the last reported quarter, the company delivered a positive surprise of 6.8%. Per the earnings record, it beat estimates in all of the trailing four quarters, the average beat being 9.5%.

In the past three months, shares of Advance Auto Parts have underperformed the industry it belongs to. The stock has lost 5.8% against 2.4% growth recorded by the industry during the period.

Advance Auto Parts, Inc. Price and EPS Surprise

 

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

Factors Influencing This Quarter

With the aim to gain additional market share, Advance Auto Parts is focusing on expansion through partnerships, increasing online presence and opening stores. In October 2018, it announced that it collaborated with Walmart. Advance Auto Parts will create an automotive specialty store on Walmart.com.

The company is reaping benefits from enhanced online traffic, which is enabling it to offer the extensive portfolio of aftermarket auto parts, accessories and maintenance items to a larger customer base. All these are likely to have positive influence on the soon-to-be-released quarterly results.

However, improving supply chain along with IT projects is increasing capital investment for Advance Auto Parts, thus, hampering margins.

Earnings Whispers

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

Earnings ESP: Advance Auto Parts has an Earnings ESP of -2.90% as the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $1.11 and $1.14, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, this, combined with its negative Earnings ESP, makes surprise prediction difficult.

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

Stocks to Consider

Here are a few auto stocks worth considering, comprising the right combination of elements to deliver an earnings beat this time around:

Garrett Motion Inc. (GTX - Free Report) has an Earnings ESP of +12.96% and it is a #1 Ranked player. Its fourth-quarter 2018 results are slated to release on Feb 20.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission Holdings, Inc. (ALSN - Free Report) has an Earnings ESP of +5.94% and it currently carries a Zacks Rank #2. Its fourth-quarter 2018 results are scheduled to release on Feb 26.

Westport Fuel Systems Inc. (WPRT - Free Report) has an Earnings ESP of +50.00% and it currently carries a Zacks Rank #3.

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