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Advance Auto Parts (AAP) Q3 Earnings: What's in Store?

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Advance Auto Parts Inc. (AAP - Free Report) is expected to report third-quarter fiscal 2016 results after the market closes on Nov 14. In the last quarter, the company posted a negative earnings surprise of 10.8%. Let’s see how things are shaping up prior to this announcement.

ADVANCE AUTO PT Price and EPS Surprise



Factors Influencing This Quarter

Advance Auto Parts drives profits through its relentless focus on store expansion. During fiscal 2015, the company opened 121 stores. In the first half of fiscal 2016, the company opened 34 stores. The increase in store count ensures higher availability of parts to customers, thereby leading to higher sales volume.

For fiscal 2016, Advance Auto Parts expects comparable store sales growth to be in the range of negative 3% to 5%. It no longer expects to achieve its adjusted operating margin target of 12% and free cash flow of $500 million. Weak annual guidance reduces optimism about any improvement in the company’s third-quarter results as well.

Advance Auto Parts has also been witnessing a decrease in cash flows from operations. In the first half of fiscal 2016, operating cash flow was $192.9 million, down from $330.8 million in the year-ago period. Free cash flow in the said period amounted to $54.9 million, significantly lower than $216.3 million in the prior-year period. The company’s weak financial position remains a concern.

In addition, Advance Auto Parts faces challenges from rising new vehicle sales and price competition. This can adversely affect the company’s quarterly results.

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 $1.74. 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 #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Meritor, Inc. (MTOR - Free Report) – a Zacks Rank #3 stock – will report its fourth-quarter and fiscal 2016 (ended Sep 30, 2016) financial numbers on Nov 16.

Power Solutions International, Inc. will report its third-quarter 2016 financial numbers on Nov 16. It carries a Zacks Rank #3.You can see the complete list of today’s Zacks #1 Rank stocks here.

SORL Auto Parts, Inc. (SORL - Free Report) – a Zacks Rank #3 stock – will report its third-quarter 2016 financial numbers on Nov 14.

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