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Advance Auto Parts (AAP) Misses on Q4 Earnings, Beats Sales

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Advance Auto Parts Inc. AAP reported a decline in adjusted earnings to $1.00 per share in the fourth quarter of fiscal 2016 (ended Dec 31, 2016) from $1.22 earned in the prior-year quarter. The figure also missed the Zacks Consensus Estimate of $1.09. Adjusted net earnings declined to $125.6 million from $157.6 million in the fourth quarter of fiscal 2015.

Revenues improved 2.5% year over year to $2.08 billion and surpassed the Zacks Consensus Estimate of $2.01 billion. The year-over-year rise in the top line was due to growth in comparable store sales and a Worldpac branch opening, partly offset by store closures and Carquest store consolidations. Comparable store sales grew 3.1% in the reported quarter as against a decline of 2.5% recorded a year ago.

Gross profit declined to $907.6 million or 43.6% of sales in the reported quarter from $909.2 million or 44.7%, recorded a year ago. The decrease in gross profit margin can be attributed to supply chain expenses and headwinds related to inventory level reductions.

Adjusted selling, general and administrative (SG&A) expenses totaled $781.9 million or 37.5% of sales in the quarter under review, compared with $751.6 million or 37% in the fourth quarter of fiscal 2015. The rise in SG&A was due to continued investments in customer service initiatives.

Comparable operating income rose 5.4% to $106.1 million from $100.7 million in the prior-year quarter. Adjusted operating margin was 6% as against the 7.7% figure recorded a year ago.

Advance Auto Parts Inc Price, Consensus and EPS Surprise

 

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

Full-Year 2016

For full-year 2016, Advance Auto Parts reported adjusted earnings of $7.15 per share, down from $7.82 reported in 2015. The figure also missed the Zacks Consensus Estimate of $7.24. Operating income in the year fell 4.6% to $787.6 million.

Revenues in 2016 were $9.57 billion, down from the $9.74 billion earned in 2015. However, revenues surpassed the Zacks Consensus Estimate of $9.5 billion.

Dividend

On Feb 15, 2017, the board of directors of Advance Auto Parts declared a regular quarterly dividend of 6 cents per share, payable on Apr 7, 2017, to stockholders on record as of Mar 24, 2017.

Financial Position

Advance Auto Parts had cash and cash equivalents of $135.2 million as of Dec 31, 2016, reflecting an increase from $90.8 million as of Jan 2, 2016. Total long-term debt was $1.04 billion as of Dec 31, 2016, compared with $1.21 billion as of Jan 2, 2016.

During the 52-week period ended Dec 31, 2016, operating cash flow was $500.9 million compared with $689.6 million in the year-ago period. Free cash flow in the said period amounted to $241.3 million compared with $454.9 million in the prior-year period. Capital expenditures amounted to $259.6 million compared with $234.7 million a year ago.

Store Update

Advance Auto Parts enhances profits through its continued focus on store expansion. As of Dec 31, 2016, the company’s total store count was 5,062, including 127 Worldpac branches. Advance Auto Parts served roughly 1,250 independently owned Carquest stores as of that date.

Outlook

For full-year 2017, Advance Auto Parts expects adjusted operating income margin to improve 0.15−0.35%. The company also expects to open 75−85 new stores, including Worldpac branches.

Capital expenditure for the year is projected to be roughly $250 million.

Advance Auto Parts has underperformed the Zacks categorized Retail/Wholesale-Auto Parts industry over the past three months. The company’s shares have lost 3.2% over this period, as against a 0.6% gain recorded by the industry.

Zacks Rank & Other Stocks to Consider

Advance Auto Parts currently carries a Zacks Rank #2 (Buy).

Other well-ranked stocks in the auto space include Spartan Motors Inc. SPAR, American Axle & Manufacturing Holdings, Inc. (AXL - Free Report) and Ferrari N.V. RACE, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Spartan Motor has long-term expected growth rate of 15%.

American Axle has long-term expected growth rate of 8.07%.

Ferrari has long-term expected growth rate of 15.15%.

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