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Advance Auto Parts Inc. (AAP - Free Report) reported a decrease in adjusted earnings to $1.73 per share in the third quarter (ended Oct 8, 2016) of fiscal 2016 from $1.95 earned in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $1.72. Adjusted net earnings declined to $128.6 million from $144.2 million in the third quarter of fiscal 2015.

Revenues dropped 2% year over year to $2.25 billion but surpassed the Zacks Consensus Estimate of $2.20 billion. The year-over-year decline in the top line was due to a fall in comparable store sales, store closures in 2015 and the effect of Carquest store consolidations. Comparable store sales fell 1% in the reported quarter as against 0.5% growth recorded a year ago.

Gross profit dropped to $988.2 million or 43.9% of sales in the reported quarter from $1.03 billion or 45.2% of sales a year ago. The decrease in gross profit margin can be attributed to supply chain expense and headwinds related to reducing inventory levels.

Comparable selling, general and administrative (SG&A) expenses totaled $770.6 million or 34.3% of sales in the quarter under review, compared with $788.6 million or 34.4% of sales in third-quarter fiscal 2015. The decrease in SG&A resulted from continued cost reduction initiatives, partially offset by investments in customer service initiatives.

Comparable operating income fell 10.8% to $217.6 million from $243.8 million in the prior-year quarter. Adjusted operating margin was 9.7% versus 10.6% a year ago.

Dividend

On Nov 8, 2016, the board of directors of Advance Auto Parts declared a regular quarterly dividend of 6 cents per share, payable on Jan 6, 2017, to stockholders on record as of Dec 23, 2016.

Financial Position

Advance Auto Parts had cash and cash equivalents of $119.5 million as of Oct 8, 2016, reflecting an increase from $90.8 million as of Jan 2, 2016. Total long-term debt was $1.04 billion as of Oct 8, 2016, compared with $1.21 billion as of Jan 2, 2016.

During the 40-week period ended Oct 8, 2016, operating cash flow was $409.4 million compared with $520.1 million in the year-ago period. Free cash flow in the said period amounted to $205.2 million compared with $358.9 million in the prior-year period. Capital expenditures amounted to $204.2 million compared with $161.2 million a year ago.

Store Update

As of Oct 8, 2016, the company’s total store count was 5,058, including 127 Worldpac branches. Advance Auto Parts served roughly 1,250 independently owned Carquest stores as of that date.

ADVANCE AUTO PT Price, Consensus and EPS Surprise

 

ADVANCE AUTO PT Price, Consensus and EPS Surprise | ADVANCE AUTO PT Quote

Zacks Rank

Advance Auto Parts currently carries a Zacks Rank #4 (Sell). Some better-ranked auto stocks include America's Car-Mart Inc. (CRMT - Free Report) , Gentex Corp. (GNTX - Free Report) and Rush Enterprises, Inc. (RUSHA - Free Report) .

America's Car-Mart has witnessed positive estimate revisions over the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%, compared to the industry average of 13.20%.

Gentex, also a Zacks Rank #2 stock, has a long-term expected growth rate of 11.20%.

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